Consulting firm McKinsey & Company is out with a new report that examines the impact the pandemic had on real estate—and it’s tough new for some of the country’s biggest cities.
According to the report, untethered from their offices, residents have left urban cores, with some 7 percent of residents leaving big cities from mid-2020 to mid-2022. New York City’s urban core lost 5 percent of its population while San Francisco’s lost 6 percent.
The urban cores where population growth was smallest in relation to their suburbs tended to be those with expensive homes, high office density, a high share of workers in the knowledge economy, and limited retail presence. London, Dallas, New York, San Francisco, and Boston were the most affected.
“What is certain is that urban real estate in superstar cities around the world faces substantial challenges,” the report notes. “And those challenges could imperil the fiscal health of cities, many of which are already straining to address homelessness, transit needs, and other pressing issues. But the challenges also provide an opportunity to spur a historic transformation of urban spaces. By becoming more flexible and adaptable in everything from the makeup of neighborhoods to the design of buildings—in essence, becoming more ‘hybrid’ themselves—superstar cities can not only adapt but thrive.”
A slight bright spot in the data notes that the rate of out-migration from urban cores has now returned to its pre-pandemic trend, but research suggests that few of the people who left will return.