Various economic forces are positioning urban communities as the next "suburbs." Residents, including many newly formed households, now view America’s cities as offering the highest potential quality of life. Many consider this phenomenon to be largely a function of dramatic changes in the current economic environment, including $3- to $4-per-gallon gasoline, rising electricity prices and the ongoing credit crunch, which has made it more difficult for households to qualify for larger mortgages.
Undoubtedly, these short-term economic factors have had an impact. As an example,
The Wall Street Journal reports home values in the Milwaukee metropolitan area were 1.4 percent higher during the first quarter of 2008 than one year prior. But between 10 miles and 20 miles beyond the downtown perimeter, prices were down 1.6 percent. Twenty to 30 miles out, prices were down 3.3 percent; 30 to 40 miles out, they were down 6 percent. Similarly, a poll conducted earlier this year by California State University, Sacramento, found high gasoline prices emerged as the Sacramento area’s prominent concern, and 12 percent of respondents changed jobs or moved in the past year to reduce their commutes to work. Even with oil prices falling from $147/barrel to roughly $95/barrel, the move back into and toward U.S. cities appears here to stay.
The re-urbanization of America is long term in nature and does not solely depend on rising energy prices and subprime mortgage crises. Indeed, the emerging preference for urban living among many American households became increasingly apparent during the 1980s and 1990s, when several U.S. cities enjoyed transformative rebirths even as the prices of gasoline and electricity remained relatively low.
By 2000, U.S. Census data indicated more Americans were living in cities than a decade earlier. This represented a stark reversal from the post-World War II period, when many populations in large U.S. cities began to recede rapidly. This urban decline climaxed during the 1970s when New York City, Chicago, Boston, Minneapolis, Atlanta and other major U.S. cities each lost more than 10 percent of their respective populations. By the early 1980s, many scholars predicted large U.S. cities were dying.
But, during the 1980s, New York and Boston began to expand robustly. Chicago, Atlanta and Minneapolis joined the ranks of the renascent during the 1990s. By 2001, a
USA Today headline proclaimed, "Cities Boom Once Again: Census Numbers Affirm an 'Urban Renaissance.'" The list of reinvigorated cities has expanded to include Baltimore; Washington, D.C.; Philadelphia; Portland, Ore.; Milwaukee; and Seattle. Much of the appeal stems from generational waves that have yet to produce their full impact as a growing population of young people, empty nesters and baby boomers rekindle demand for urban living. Unlike their parents, many young adults who help repopulate urban America grew up in the suburbs and will remain in the city until they have school-age children, and perhaps longer if the urban renaissance spreads to encompass city school districts.
While this shift back to the future may appear to implicate residential developers, strategically placed commercial contractors also can benefit immensely from the urban wave. Cities such as Denver, Charlotte, N.C., and Portland are making significant investments in public transportation, which in turn is spurring the construction of mixed-use complexes near transit stations. Reconnecting America, a nonprofit group that advocates for transit-oriented development, estimates the number of households living near transit stations will skyrocket from 6 million today to 15 million by 2030, which, if even partially true, will produce sizeable opportunities for retail, office, hotel and entertainment venue developers.
This urban movement also will require investment in city infrastructure, including light rail stations, metro stops, streetcars and bus rapid transit. All of this will create opportunities for contractors, though in the near term many of these projects may remain in the planning stage as states and municipalities continue to deal with substantial fiscal shortfalls.