America has had several great migrations of historical proportions: the manifest-destiny westward-ho movement to the Pacific in the 19th century; the trek north for Blacks from the south to big cities for factory jobs and a better life; the post-World War II move out of urban areas to the suburbs, and the more recent generational shift of youth to the cities.
To these we can now add the Great Migration of families and young people out of the cities to the suburbs — and beyond. Call it what you want, but as the country starts to adjust to the post-pandemic era, it is experiencing the Suburbanizing Twenties.
[callout]City dwellers, freaked out by social distancing, want more space and want that space to be further away from the guy coughing across the street. In the meantime, the ability to move out of job hubs has been facilitated by work-from-home/work-from-Starbucks practices.[/callout]
Among all the other game-changing events of the past year and a half, the move of so many people out of cities and urban areas may have the greatest long-term effect on both the country and companies servicing that demographic.
This great shift is very much a work in progress. Initial quantitative and qualitative data seems to suggest it’s a very real thing. Housing prices are climbing exponentially in suburban areas surrounding big cities and just about everybody knows somebody who has sold their house for full-boat — or more — with multiple offers to choose from. In the meantime, vacancy rates in urban areas are at higher levels than anyone can remember in at least a generation. “We’ve never seen migration like this,” executives of the big home builder Toll Brothers said on a recent earnings call. Economist writer Bill McBride, quoted in The Atlantic, had the same take. “I’ve never seen anything quite like this. It’s a perfect storm.”
You don’t need to be a practicing healthcare worker — or a realtor — to understand why this is happening. City dwellers, freaked out by social distancing, want more space and want that space to be further away from the guy coughing across the street. In the meantime, the ability to move out of job hubs has been facilitated by work-from-home/work-from-Starbucks practices. Even as offices started to reopen this spring, we’re seeing many big companies allowing their employees to continue working away from the office (the three-day in-office model seems to be gaining traction) and that could continue indefinitely.
The Urban Millennial Move
Lost in all of this moving around is a natural generational progression that was just starting pre-pandemic and had been predicted for years. Millennials — now the largest demographic group in the country — are, quite simply, not kids anymore and are forming families, having children and requiring all the things that come along with that: backyards, better schools, soccer practice fields and chain restaurants where messy toddlers don’t upset the cuisine.
As much as this generation said they were staying in the city and would never move to the pedestrian suburbs, they are doing exactly what their parents and grandparents did before them. It’s not a genetic factor, it’s just inevitable as a life stage decision.
All of this demographic rearranging is having a profound effect on the companies that make and sell a wide variety of products and services. Serving next-gen customers runs counter to what was considered conventional thinking only 18 months ago.
- Home Furnishings
The entire home products business has been on a tear the past year with people spending more time inside and using their newly found disposable income on redecorating and remodeling instead of vacations and travel. Yet, the industry has been terrified this will all come to a crashing halt as we all venture out from our hibernations. While we’re already seeing the first signs of income redeployment, the boom in housing in the suburbs clearly signals that the end is nowhere in sight. Consumers may have spent money on where they used to live but not on where they just moved into. It’s why as long as housing market continues to ride high, home furnishings sales will follow right alongside it.
- Shopping Malls
Trashing less than A-level shopping centers has been a favorite activity for industry pundits for years, trotting out statistics about over-storing and dead spaces. But what they have overlooked is that the people moving to the suburbs are going to shop in the suburbs. They are not going back downtown where they escaped from in the first place. Smart mall operators who can transition their real estate to a better balance of retail, hospitality, services and even mixed commercial and residential uses are going to come out of this just fine. Yes, some malls are going to get bulldozed and turned into condo complexes. But far more of them are going to remain in place and become retail relevant once again.
- Think Small
Perhaps the most unexpected consequence of all of this is the burgeoning rebirth of specialty retailing. It seemed like just yesterday we were all lamenting the doom of independent stores outside city centers that no longer had the customer base or physical location to appeal to next-gen shoppers. Well, if you can\’t go to them, have them come to you. With all of these new residents in the suburbs coming to the \’hood with urban sensibilities and the social consciousness to support small business, suddenly specialty retailers have become the right stores in the right places…and most importantly at the right time. This rebirth in small-ball retailing is going to be one of the most fascinating, and welcoming, outcomes of the Great Migration.
What may not change is the desire for millennials and soon, Gen Zers, to want interesting goods and services to buy. Having acquired a taste for artisanal and maker-made products while they were hipsters downtown, they are going to want similar things in their new neighborhoods. These next-gen folks bring a different taste level with them. It means some chain stores are not going to be able to adapt quickly enough to offer what these shoppers want. But somebody else more clever and nimble will.
As has been proven over the past year and a half, making predictions about what’s going to happen next is a fool’s game. So many unpredictable things have occurred that these forecasts are just the obvious tips of a very large — and very volatile — iceberg. In an era when we are facing unprecedented upheaval, the Great Migration is unlike anything we’ve ever seen before.