The City vs. The Suburbs
You can feel it when you walk around Manhattan these days. The city seems more vibrant, more active than ever before. In fact, this is more than a feeling; it’s the verified truth.
Earlier this year the U.S. Census Bureau reported that the population of New York City reached a record high in 2013 of 8.405 million people. In addition, the number of people working in New York City–many of whom come in from the suburbs every day–is also at a record high. This growth reflects a national trend toward re-urbanization that is being led by the “millennial generation”. Millennials form the generation born between the early 1980s and the early 2000s. This age group is now in the process of entering the workforce in significant numbers. They are the largest population cohort to enter the labor force since the baby boom generation born in the 1950s and 1960s.
One characteristic of the millennial generation is that they prefer to live and work in cities. According to a recent survey by Nielsen, millenials “are currently living in these urban areas at a higher rate than any other generation, and 40 percent say they would like to live in an urban area in the future.” As this generation is entering the workforce, they are changing the way companies look at where they locate. One consequence has been a shift in job growth away from suburbs to cities.
In New York, where we can look at employment trends in both the city and the suburbs, the trend has been remarkable. From 1992 to 2004 employment in the New York metropolitan area (the city plus the suburbs of Long Island, Northern New Jersey and Westchester, Putnam and Rockland counties) increased by roughly 830,000 jobs. Approximately 215,000 of those jobs were in New York City and 615,000 were in the suburbs. Since 2004, the trend has completely reversed. From 2004 to 2014 there have been an additional 500,000 jobs created in the metropolitan area. Approximately 495,000 of them were in New York City, with only 5,000 jobs created in the suburbs over the past decade.
The next generation of workers wants to live in cities and the businesses that want to tap into that labor force are following them. For the commercial real estate industry. this means the demand for office space will grow much more strongly in central business districts over the next several years at the expense of suburban markets.