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Are you leaving town?

Are you leaving town?
Henk Grootveld - Head of Trends Investing

Henk Grootveld

Head of Trends Investing

Pandemics have always had a profound effect on human history, and especially on cities. Although the current COVID-19 virus has not caused the percentages of casualties we have seen in history, and hopefully it never will, we still believe that this pandemic will bring about profound changes in our society.

We expect the COVID-virus will mark the end of urbanisation and, for now, will stop mankind’s march into cities, which has been on going ever since the industrial revolution. While the pandemic stands to exacerbate de-urbanisation, it is important to note it is not the only force powering this trend. As we will discuss in this paper, a combination of digitisation, an ageing society and virus fears are all steadily impacting the appeal and prioritisation of city living and we believe that 2020 will mark the peak in urbanisation.

Viruses are just like most people in their clear preference for the city life. The current pandemic originated in Wuhan, China, a city of 11 million people. Proximity and poverty, both very much linked to the city life, are the two factors that statistically increase the likelihood the most of getting infected with COVID-19. During the first wave of the virus, most Western cities saw their population decline, not only due to increasing deaths but mostly due to fleeing citizens. It is estimated that 10% of the population of cities like New York and Paris left during the first wave

It is estimated that 10% of the population of cities like New York and Paris left during the first wave

The commonality we see in many major cities is that the wealthy citizens are the first to leave. The effect of wealth leaving the cities could be long lasting, as they are often the ones filling the restaurants and keeping luxury shops and boutiques afloat. We expect the retirees to be next category to flee to suburban and rural areas, if they have not done so already. Their motivation will more driven by virus fears, avoiding crowds and increasing crime rates. Depending on how successful the work at home movement becomes after the pandemic, the millennials with young children will be the next category on the list. In some cities this trend was already underway and just got a major push by the pandemic.

The implications for big cities are immense. If proximity to one’s job is no longer a significant factor in deciding where to live, then the appeal of the suburbs wanes. We expect new villages closer to or surrounded with nature to rise in prominence, while traditional commuter belts and city centers to fade away. For investors there are some clear angles for growth which will arise from this trend, which we will explore in this paper in more detail.

 

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