Will coronavirus cause a big city exodus?

Abstract

What does the pandemic mean for the future of cities? We’ve seen predictions that COVID-19 is an ‘extinction-level event’ for expensive, commuter-driven urban cores. We’ve also seen confidence: if the ‘death of distance’ didn’t finish off big cities in the 1980s, why should this time be different? A key uncertainty is how working from home affects productivity and innovation. A second is how we exit the pandemic. Exploring these issues helps us understand how big cities could now evolve.

Full text

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Forthcoming in Environment and Planning B: Urban Analytics and City Science
Commentary
Will coronavirus cause a big city exodus?
What does the pandemic mean for the future of cities? We’ve seen predictions that COVID-19
is an ‘extinction-level event’ for expensive, commuter-driven megacities. We’ve also seen
confidence: if the ‘death of distance’ didn’t finish off big cities in the 1980s, why should this
time be different?
These debates are bound up – in the UK and US, at least – with worries about empty city centres
and working from home. At the time of writing, a majority of UK workers is commuting at
least once a week (Figure 1, left). But city centre footfall – especially in the biggest places –
remains well down (Figure 1, right). And within big cities like London, footfall is shifting from
cores to suburbs (Anderson, Hesketh et al. 2020).
Figure 1. Left: Where are people working? Right: Footfall by city size.
Is this the beginning of the end for big cities? Academics have been quick to make predictions
(Batty 2020, Couclelis 2020, Florida, Rodríguez-Pose et al. 2020, Kellerman 2020, Kleinman
2020). How should we assess the possibilities? A key uncertainty is how working from home
affects productivity and innovation. A second is how we exit the pandemic. Exploring these
issues helps us understand how big cities could now evolve.
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10
20
30
40
50
% of respondents
27may2020
03jun2020
10jun2020
17jun2020
24jun2020
01jul2020
08jul2020
15jul2020
22jul2020
29jul2020
05aug2020
12aug2020
19aug2020
26aug2020
02sep2020
09sep2020
Week ending
Working from home only Travel to work only
Both working from home and travel to work Furloughed
Neither
Source: ONS Opinions and Lifestyle Survey. Base = GB. Weekly data

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1/ Remote possibilities
Home working is increasingly feasible for many activities, including complex tasks requiring
interaction (Clancy 2020). So why isn’t it more common? One barrier is practicality. In most
countries, the nature of the work – the ‘task content’ – means only a minority of jobs can be
done from home – around 44% in the UK (Dingel and Neiman 2020). Another barrier is inertia.
Pre-pandemic, only 27% of UK workers had ever worked from home: a big gap (Office for
National Statistics 2020). This gap has now closed: in a recent survey regular remote working
had risen from 6% pre-pandemic to 43% by the end of June (Felstead and Reuschke 2020).
That share will be higher in big cities.
As Clancy notes, even if remote working is not be as effective as face to face, firms may trade-
off less effective working practices for cost savings. The effect on productivity of the current
shift is unknown. Newly-remote urban office workers work longer days, have more, but
shorter, meetings and do more email (DeFilippis, Impink et al. 2020). While 29% of workers
in Felstead and Reuschke’s survey report higher output, 30% say it had fallen.
We also lack robust pre-pandemic evidence. In specific cases – patent examining or call centres
(Bloom, Liang et al. 2014, Choudhury, Foroughi et al. 2020) – shifting to remote working
increased productivity. This tells us how existing teams adjust but says little about long term
change. Those dynamics matter. Physically co-located workers – in workplaces, but also in
incubators, accelerators and science parks – can learn more easily from each other, and develop
and test new ideas (Madaleno, Nathan et al. 2018). These effects extend beyond the firm.
Physical proximity in cities increases innovation, and this link remains strong, even as remote
working tools have improved and travel costs have fallen (Duranton and Puga 2020). Dense
urban areas are good at generating unconventional ideas (Berkes and Gaetani 2019) including
through serendipitous interaction (Atkin, Chen et al. 2019). Even as new ideas diffuse, their
birthplace retains disproportionate job shares in related activities (Bloom, Hassan et al. 2020).
Learning is especially important for younger workers, who experience bigger wage gains when
moving to urban cores (De La Roca and Puga 2017).
This raises the question of the private versus the social benefits of proximity. Even if shifting
to home working makes individual firms more productive, cities could still lose the collective
benefits of between-firm and worker interaction. Of course, mass remote workarounds for face

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to face may emerge (Page 2020). And constraints on face-to-face interaction can also alter the
direction of innovation, in ways that might bring benefits (Andrews 2019). But these latter
possibilities are highly speculative.
Firms will continue to experiment with ways of reorganising office work in the coming months.
The longer the period of forced experiment, the more firms and their workers can figure out
what works for them. This is one of many reasons why the length of the pandemic will matter.
2/ Early exit
An effective vaccine available from mid-2021 will mean a rapid end to the disruptions caused
by lockdowns and social distancing. Unfortunately, temporary shocks – such as lockdown –
could have permanent scarring effects. The resilience literature suggests that richer regions,
with more educated workforces, bounce back faster from recessions.
We should not assume a rapid return to pre-COVID norms. The pandemic may change longer-
term behaviour – even if we exit early. Expectations about the likelihood of future pandemics
may change, and that could shift preferences for big city living. The forced experiment of mass
remote working could also act as a collective nudge. If this overcomes organisational inertia,
working from home could permanently increase. These shifts, and others, are more likely if
exit from the pandemic happens later.
3/ Exit later
What if a vaccine is two to three years away or – rather less likely – that COVID-19 becomes
less infectious, or herd immunity emerges? This prolongs forced experimentation and moves
us further from old norms.
If working from home does become an effective substitute for face-to-face interaction – and
this is debatable – then it could increase the spatial footprint of more dynamic firms and cities
as commuting does, but at lower economic, social and environmental costs. If this vision of
workers in rural idylls dialling into high-paying, big city jobs sounds familiar, that’s because it
is: mass telecommuting, first promised decades ago, will have arrived.
One challenge to this rosy outlook is greater offshoring: if a task can be done anywhere, why
not outside the UK? A second challenge is that profound reductions in transport and

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telecommunication costs generate further shifts in geographies of people and jobs, as changes
in location preferences work through the urban system.
For home-working households, less commuting weakens the link between residential and work
location. This means non-work considerations can play a bigger role in choosing where to live.
In the UK, housing shortages and unresponsive supply make large population adjustments
unfeasible. Instead, any significant drop in demand for big cities will produce higher house
prices in desirable non-urban locations. Higher-paid jobs are more amenable to remote
working, reinforcing these price effects. A similar story could play out within cities, with
wealthier households moving to desirable suburbs. These shifts will reinforce spatial
segregation, rather than ‘levelling up’.
Wealthy households moving to the suburbs also increase demand for high-end shops,
restaurants and gyms in those neighbourhoods. Will we see one-for-one shifts of activity from
central cities to suburbs? This will depend on the extent to which households substitute home
production, local or online purchases for the services they used to consume while at work.
Many workers may make their own lunch when working from home Some shopping will shift
to local businesses but it will also move online. Lockdown has seen many households substitute
online shopping for physical retail (Relihan, Ward Jr. et al. 2020). Offsetting this is reduced
expenditure on commuting and office clothing; against that, there is higher spending on office
equipment and energy at home.
What about office work? A shift to home working lowers demand for office space and even as
firms hold onto offices, many are already renegotiating or withholding rents. But companies
are also experimenting, reorganising roles and workflows. One decision for firms is what tasks
need to be done in the office, under social distancing if required. Another decision is when
these tasks will be done - city traders who need fast, bespoke internet connections may need to
be always-in, for example. Companies will need to figure out the impacts of home versus office
working, and change management practices around this.
All this makes it hard to predict the future of urban office markets. We may see a lot more full-
time remote working, or more mixed patterns (‘in five days in ten’). In the former case, total
demand for office space will be lower. In the latter, total demand may be the same or higher.

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US firms surveyed in June predicted zero change in future demand for space (Altig, Barrero et
al. 2020).
The wider geographical affects are also hard to predict. Falling transaction costs could lead to
more concentration, with front office activities in city centres while ‘back office’ activities
move to the suburbs. Functional specialisation could see headquarters increasingly
concentrated in bigger cities, while smaller cities specialise in production.
4/ No exit
In the absence of an effective vaccine, declining infectiousness or herd immunity, Covid-19
will stay endemic, and will need to be managed through large-scale testing, track and trace and,
if that fails, local lockdowns (Aleta, Martín-Corral et al. 2020). Where would this leave big
cities?
One key question is whether big cities are more vulnerable to Covid-19, or future pandemics.
Big cities have long been hard hit by disease but evidence on Covid-19 is limited. Contact-
tracing studies highlight how prolonged exposure in crowded, enclosed environments and
events spreads the virus (Cevik, Marcus et al. 2020). Yet this doesn’t mean that size, density
or connectivity makes big cities inherently riskier.
In the UK and elsewhere, the biggest, densest cities were hit earlier. But allowing for timing,
there may be no link between Covid-19 death rates and density (Carozzi, Provenzano et al.
2020). Other factors may offset the proximity disadvantage of big cities: younger than average
populations, for example, and more residents who can reduce exposure by changing behaviour.
If these findings generalise, economic, physical or demographic characteristics – reliance on
public transport, crowded housing, physically and economically exposed work in frontline
services, and concentrations of vulnerable groups – may better explain the spread of Covid-19.
While these are features of many big cities, especially in more deprived neighbourhoods, they
are also characteristics of poorer small cities and towns – where coronavirus cases are now
high.
A radical shift in economic geography becomes more likely as the time to exit increases. A
long crisis could alter beliefs about the likelihood of future pandemics, thus changing
behaviour. Slow exit also allows further development of remote working practices and

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technologies. Diffusion lags can be lengthy: two decades passed before factories took full
advantage of electrification, for example (David 1990). Large-scale shocks can also lead to
permanent shifts – between ‘multiple equilibria’ – even if underlying fundamentals don’t
change. The benefits of co-location reduce when everyone is working from home. This reduces
the individual benefits of a return to the office, even if there would be collective benefits from
doing so.
‘No exit’ could also lead to other, long-term transformations. For example, for older
households, more vulnerable to the disease, the benefits of home working will increase, while
the amenity benefits of cities will weaken. As the young are less vulnerable, the demography
of city centres could get even younger, while older households move to the suburbs or out of
cities entirely.
Other adjustments will be needed. For example, can cities that rely on public transport find
innovative commuting arrangements that manage congestion and allow employment to remain
concentrated in the city centre (Hidalgo 2020)? How will they manage this given falling tax
revenues, if demand for office space falls and takes some local services with it?
5/ Conclusions
The virus has already altered patterns of working, shopping and social interaction: the question
is whether – and how – these continue.
Time to exit will shape big city futures. National differences will also matter. In countries with
effective public health responses, change will be voluntary: as public confidence returns, firms
and households can try out new ways of organising life and work (Parnell 2020). By contrast,
in countries where the virus response is poor, forced adaptation will continue with all the
difficulties that entails.
There will be other globalised pandemics. And cities still need to address larger, pre-existing
challenges: most obviously, climate change. The way in which cities adapt to the current crisis,
and the lessons learned for other challenges, may be as important as the novel coronavirus
itself.

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Max Nathan
University College London & Centre for Economic Performance. Corresponding author.
max.nathan@ucl.ac.uk
Henry Overman
London School of Economics and Political Science & Centre for Economic Performance
h.g.overman@lse.ac.uk
An earlier version of this piece was published on the UKRI Economics Observatory.
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