- Big cities like New York City and San Francisco are not nearly dead yet.
- The pandemic accelerated preexisting migration, but BofA Research says reopening will spark returns.
- Both cities are already seeing returning residents, increased spending, and stimulus plugging budget holes.
- See more stories on Insider's business page.
Big cities are alive and well.
Urban dwellers fled their cramped, expensive apartments in favor of more space out in the suburbs. That was the story of 2020, as Insider reported multiple times. But millions of people live in big cities, and hundreds of thousands who left might move back.
That's the argument from a recent Bank of America Research note, by a team led by Head of US Economics Michelle Meyer, which says the shift isn't the urban exodus it appeared to be. BofA said that while the pandemic accelerated preexisting migration out of cities like New York City and San Francisco, those two are the only true examples of anything resembling an exodus, and reopening will spark a return to both cities.
"Both have the potential for some recovery in the near term," the note reads. "NYC and SF remain premier cities for young renters given their status as economic, financial, and cultural centers, and the pullback in rents over the past year helps affordability."
As housing prices increased to record highs across the country, NYC and San Francisco saw rents plummet. According to Apartment List, NYC rents dropped to about 22% from March 2020 through January 2021 and San Francisco rents fell to roughly 26% during the same time frame. Rents in both cities have begun to rebound, but both are still much lower than they were pre-pandemic.
The decline has enabled young professionals in both San Francisco and NYC to upgrade to solo living or luxury apartments for the first time, locking in discounts as high as $1,000. Some have even scored leases exceeding the typical year, signaling that they're not going anywhere anytime soon.
As both cities slowly reopen, signs of economic life have already been emerged. Spending on brick-and-mortar retail in NYC hovered around 70% in the first three months of the year, while in-person spending on restaurants has improved. As of mid April, it's still down 30% compared to two years ago, according to separate BofA data, still a major improvement from the 70% drop at the end of January.
Over in San Francisco, card spending was up by 10% in April compared to two years ago, although not quite as high as the 15% increase in NYC. Insider's Melia Russell and Berber Jin reported that venture capitalists are confident the Bay Area will make a comeback and remain the global capital of entrepreneurship.
People plan to move back to NYC and San Fran
BofA's findings echo new data released by USPS earlier this week. Reporting on the same data, Bloomberg deemed the urban exodus more of an "urban shuffle."
Manhattan overall saw temporary moves increase by 138%, according to USPS data, a number that may not even include those with second homes elsewhere, but a closer look at the data shows the moves were mostly local, often within the region or even the same city.
While 19,000 Manhattanites moved to Florida, 10,000 said they plan to move back. In fact, more residents - 20,000 - moved to the neighboring borough of Brooklyn than to Florida. Some of those who left for northeastern suburbs are already returning to the city, and that's also happening in the Bay Area. While San Francisco saw rates of permanent moves increase the most, per USPS data, temporary moves also more than doubled in the area, compared to 17% nationally.
Many of those who did move permanently out of the two cities didn't go far. Some San Franciscans headed out to Sacramento or Oakland, while some New Yorkers moved east to Long Island, upstate to Westchester, or a train's ride away to Bridgeport, Connecticut, or Philadelphia, according to Bloomberg.
Big cities aren't dead, but they're changed - or diminished. Urban areas stand to see an estimated 10% drop in spending, or greater, from an economy where more workers are remote. But the return of former residents, signs of increased spending, and federal aid in the form of $600 million for San Francisco and $5.6 billion for NYC signal an economic revival, even if the landscape looks different than it did pre-pandemic.
As BofA put it, the urban flight is "more myth than reality."