A number of news articles from prominent sources say that urban flight is occurring in large metro areas and predict it will be an ongoing trend. On the other hand, other media report very little difference in rent performance between urban and suburban geographies.
So TransUnion conducted our own study to see if our data would support the theory of a mass exodus from the cities to the suburbs. We also gathered a group of industry experts for a webinar to discuss the findings.
Our study focuses primarily on May to July of 2019 and 2020 to account for the impact after the stay-at-home orders.
We also focused the analysis on actual population density of zip codes as opposed to specific metro areas since many major metros can be comprised of both densely populated and more suburban regions. Each zip code was categorized into one of four categories:
- Dense urban
To give some perspective on what those groupings look like, here is an example of downtown Chicago.
Downtown Chicago Population density
|Density group||Population per sqare mile|
|Dense urban||>= 8,501|
|Urban||4,501 - 8,500|
|Suburban||1,001 - 4,500|
Source: US Census Bureau
Up, down or no change?
All geographies are seeing decreases in overall rental activity, but the share of rental application traffic in each geography can point to shifts in renter preferences.
If you categorize all application activity into rural and non-rural geographies, you will find that there is little difference in renter activity, with urban activity decreasing by 4.5% and non-urban activity decreasing 4.2%.
However, looking at more granular geographic assignments, the data suggests that the most significant decreases are in the extremes of “dense-urban” and “rural” areas.
For example, figure 2 shows that during May to July in 2019, dense urban made up 11% of all applications. The following year, it was 10.8%. While that may not sound like a dramatic shift, it represents a 1.4% decrease in share during a relatively short period of time.
The largest decrease appears to be occurring in rural geographies followed by dense urban. And that does seem to be in line with what we’re seeing in the industry.
Proportion of applicants by population density
|May - July 2019||May - July 2020||% Change|
Variances across geography
Traffic in leases dropped across the country. But then within four to five weeks, we started seeing that some markets actually started performing better than others. And there are some surprising trends. Across the US, traffic is down 12% year-over-year and 3.5% down month-over-month.
However, there is a large variance among geographies. For example, San Jose is down 3% compared to last year. Other markets, for instance, such as the Southern California Riverside was ahead compared to last year.
Surprisingly, markets that performed poorly 10 years ago during the financial crisis ― specifically Phoenix, Las Vegas and Tampa ― are actually some of the best performing now.
To drive home that point, let’s look at two markets, one that is ahead and one that is not doing as well.
Phoenix is one of the best performing markets. It’s up 2.5% percent versus the same time last year.
The state is ahead in occupancy versus at the same time last year; ahead in lease percentage and up in net effective rent.
Looking at net effective rent, through mid-July, Phoenix is on par versus the previous year. Net effective rent is also doing much better than at the same time last year.
San Jose really stands out – but for the opposite reason. For instance, occupancy versus last year is down 3.9%. Lease percentage is down as well.
The most telling of all the metrics, is net effective rent. Compared to the same time last year, is down to the tune of 16%.
Does renter age impact urban flight?
We also studied the generational breakdown and how their geographical preferences have changed from a year ago.
Overall, dense urban, which was the second hardest hit after rural, saw decreases. But Millennials actually increased their preference in dense urban, as well as urban.
Generation Z decreased their share of applications in dense urban, by 4.8%.
Looking at suburbia, Millennials are the only generation to show a decrease in preference for that geography.
Is urban flight a myth or reality? Our research shows it’s somewhere in between. Overall, renters prefer suburban markets, up 2.1% over dense-urban, down 1.4%.
So we are seeing initial signs of a shift in renter geographic preference towards the suburbs, but not nearly as prominently as the media would have us believe.
TransUnion recently gathered a panel of experts to share their expertise about what they see happening in the industry – and what it means for the future.
Watch the webinar on-demand here.