How the Decentralization of Cities Has Changed the U.S. Office Space Market
Among the many changes brought about by COVID-19, the disruption to work arrangements and mobility patterns is perhaps the most profound.
Since 2020, companies of all shapes and sizes have decided to re-structure their workforce, implementing new working models and providing employees with previously unforeseen levels of mobility. This freedom has resulted in many of these employees re-structuring their lives, relocating to more affordable or personally preferable cities. Moreover, the increased implementation of remote and hybrid office-work models has changed the way employers and employees think about location, causing many workers to reassess the need to live close to major business centers.
This combination of factors has led to the phenomenon of the ‘decentralized city’, typified by inhabitants drifting away from major metropolitan areas and relocating to quieter, more affordable suburbs in the urban fringe. For many Americans, large cities no longer have the pull that they used to have. The employment opportunities that once tied workers to the city center have adapted to the times, allowing employees to work wherever they have a stable internet connection. Some – previously office-bound – employees have even fallen for the appeal of country living in rural areas or small towns, attracted to factors such as low population density, accessible local government bodies, lack of invasive urban development, and the general positive effects brought on by living in open space.
The concept of the ‘decentralized city’ has implications at several levels. In the case of employers, it prompts the need to better understand the new geography of talent and how to go about attracting it.
Decentralization has been more noticeable in some sectors than others. One of the most evident is the tech industry which, prior to the pandemic, primarily operated in clusters within the Silicon Valley, Seattle-Tacoma, New York-Newark, Boston, Austin, Dallas, and Phoenix. It was also common for tech companies to establish themselves near top-tier educational institutions to benefit from partnerships and more ready access to talent. Now, many high-paying tech positions are offered fully remote. Business leaders know the talent pool is more spread out, and they don’t want to limit their hiring capabilities when compared to their competitors.
So, since many workers have left the confines of major population centers (whether permanently or temporarily), where are the new hotspots for talent?
Top US Cities Benefiting from Urban Decentralization
CBRE data show two trends in the new geography of talent. On the one hand, secondary cities that had been emerging as the next big thing have fared better when it comes to maintaining strong talent pools when compared to established urban centers. This is the case for Nashville and Austin, possibly because they already had the business and infrastructure required to attract talent, without the employment density that characterizes other markets. On the other hand, this data shows a divergence in the types of talent needed to keep the economy going and how this plays out in geographical terms. For example, West Coast cities usually have stronger innovation capabilities, whereas East Cost urban areas are more skilled at picking up ideas generated elsewhere in the nation and scaling them. COVID-19 has had little effect in that respect, since creation and scaling are still happening in the Big 4 markets: New York, the Bay Area, Washington and Seattle. However, the gap is closing with other parts of the U.S.
The most noticeable changes have come from office-based businesses that are increasingly considering alternative locations, where talent is more readily available and targetable. In this respect, Pittsburgh, Kansas City, and Sacramento have quickly become desirable. This is not only due to the high-level expertise of local talent, but also because employees can be sourced from a wide range of backgrounds.
Decentralization has also meant that some cities have experienced serious “tech brain gain” – whereby they receive greater influx than loss of tech talent, usually at the expense of the more traditional tech hubs. In this respect, the best performing cities have been Denver, Charlotte, Seattle, and Salt Lake City.
Despite early signs of recovery post-COVID, the economic scenario is still enduring major uncertainty – due to global market turmoil and record inflation. These affordability considerations have also helped further the decentralization trend, with these increased cost-of-living and future stability concerns. Both workers and companies are still understandably cautious with their spending.
The cities offering the best cost-quality ratio include:
- Dayton, Ohio.
- Colorado Springs, Colorado.
- Huntsville, Alabama.
- Charlotte, North Carolina.
- Detroit, Michigan.
The observable scope of decentralization goes beyond the nation’s boundaries, since U.S. companies are increasingly sourcing talent from other countries in the Americas. Some of the cities best poised for growth in this context are Bogotá, Panama City, Monterrey, and Guadalajara.
Wrap Up
U.S. companies have realized the tables have turned. They must now go where talent is, either physically moving entire operations or opening up satellite offices in locations identified as emergent talent hubs. Also, on the back of a more location-independent workforce, companies are allowing for a higher contingent of remote assets in their cohort – many of whom are taking advantage of flexible coworking spaces across the country. These spaces provide remote employees with a wide range of amenities and services, alongside fast internet speeds, printing facilities, networking events, meeting rooms, and complimentary drinks.
With the playing field being more open than it has ever been, and talent commanding high negotiating power, we can expect that the future will bring an even more geographically diverse distribution of talent and opportunities. Tech is leading this charge, with numerous businesses shifting away from highly expensive established markets in favor of more affordable and diverse emerging markets. Expect to see other industries follow suit, particularly as business networks begin to establish themselves in smaller markets.
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