Understanding how neighborhoods are transitioning over time is an important data set. Parker Associates has always been on the forefront of interpreting these data trends in order to assist our clients with decision making. We use a number of different tools available in the industry to ensure we have a full picture of WHO is buying as well as WHAT they are buying and HOW. One of these is the RCLCO Neighborhood Atlas. They recently released new data which shows some significant trends.
Since the release of the original Neighborhood Atlas, more than 20% of neighborhoods have shifted in one direction or the other, highlighting the elasticity and ever-changing nature of most neighborhoods today. Perhaps most notably, roughly one-third of challenged urban and suburban areas experienced some type of stabilization over the course of the last decade, following increased reinvestment in many of these locations. At the same time, a large share of formerly stable urban neighborhoods—nearly one in five—either improved into high-end urban neighborhoods or deteriorated into more challenged urban ones.
Other notable trends shown in this latest atlas shows some interesting trends. In the 50 largest metropolitan statistical areas, trends include the following:
- Urban and suburban neighborhoods are growing at the same rates. Between 2010 and 2018, the number of people living in urban neighborhoods increased by 8.5%. This rate of growth is virtually identical to the 8.4% population increase that occurred in the suburbs during the same period.
- These growth patterns are substantially different from the ones that occurred during the last decade. Between 2000 and 2010, the number of people living in the suburbs increased by 12.8%, while growth in urban neighborhoods remained flat, at just 1.2%. As such, this most recent economic cycle is likely the first time in decades that urban and suburban neighborhoods have grown at the same rate.
- Certain regions are urbanizing much more quickly than others. For example, the population of urban neighborhoods in “Gateway” metropolitan areas like Boston and San Francisco increased by 8.6%, compared to the 5.8% population growth in the suburbs of those same metropolitan areas. Meanwhile, urban neighborhoods in and around “Legacy Cities” like Baltimore and Cleveland experienced little—if any—growth, even as their suburbs expanded at an average rate of 2.0%.
- More and more families are choosing to remain in urban neighborhoods. Between 2010 and 2018, the number of families in urban neighborhoods increased by 6.2%, which is nearly the same rate at which this number increased in the suburbs. This growth is notable, considering that the number of families in urban neighborhoods decreased during the prior decade, when many moved to the suburbs instead.
- The suburbs continue to attract the majority of rental apartment development, given their size and diversity. Over the last 10 years, the suburbs added 830,000 apartments for rent, including 300,000 in Stable Middle-Income Suburbs, 270,000 in Established High-End Suburbs, and 140,000 in Greenfield Lifestyle Suburbs. Meanwhile, urban neighborhoods added 660,000 units during this time, with nearly three-quarters of this development occurring in high-density locations like Economic Centers, Emerging Economic Centers, and Mixed-Use Districts.
- Even so, the urban rental apartment inventory is expanding much more rapidly than the suburban rental apartment inventory. Although the suburbs accounted for the majority of development over the last 10 years, the rate of growth was more significant in urban neighborhoods. The number of rental apartment units in urban neighborhoods increased by 38.8% over the last 10 years, compared to just 17.9% in the suburbs.
- Rent growth has moderated in recent years, especially in urban neighborhoods. Coming out of the Great Recession, apartment rents increased in urban neighborhoods across the country, following a wave of new and high-value development. Between 2010 and 2015, the average cost to rent an apartment in urban neighborhoods increased by 7.6% per year, compared to 6.2% in the suburbs. However, average annual rent growth slowed in both urban and suburban neighborhoods between 2015 and 2019, to 5.0% and 5.4%, respectively. During this time, the slowest rent growth occurred in Economic Centers, Emerging Economic Centers, and Mixed-Use Districts, both in terms of absolute and per square foot pricing.
- Urban neighborhoods continue to face greater affordability issues than the suburbs. Urban neighborhoods have an average household income of $80,000, compared to $99,000 for the suburbs. Even so, housing tends to be more expensive in urban neighborhoods, where the average home value is $88,000 higher than it is in the suburbs. Likewise, the average monthly rent for multifamily apartments in urban neighborhoods is $1,715, well above the $1,340 seen in the suburbs.
Together, these trends highlight a critical point about growth patterns in the United States. Following decades of movement out of center cities, urban and suburban neighborhoods are now growing at almost exactly the same pace. Healthy metropolitan areas feature a range of neighborhoods, and these recent growth patterns reveal that the country is expanding in a very balanced manner.
Of course, there is an important question on the horizon now that we have reached this equilibrium: How will these growth dynamics change in the future? Many have speculated that the ongoing COVID-19 pandemic will lead to a hollowing out of center cities, as the companies that operate in those neighborhoods shrink their footprints and shift towards remote work settings, and as the people who live in those neighborhoods relocate to larger homes in less densely populated environments. However, others have suggested that the pandemic—coupled with the desire for a return to normalcy—may provide opportunities to reinvigorate urban neighborhoods. While the long-term impact of COVID-19 on our neighborhoods remains unclear, there is an important distinction between this event and other recent downturns: Urban and suburban neighborhoods are starting from a level playing field.
Parker Associates is involved with ensuring businesses and projects are as successful as possible. With our proven approach backed by a combined nearly 100 years of experience in our executive team, we have a track record of success that is unparalleled in the industry. It’s what we do. If you need assistance with your business in any way, contact Parker Associates and PTC Computer Solutions. We are ready to help.
David WB Parker is a principal of Parker Associates of Jacksonville, Florida, marketing consultants to the real estate industry; President of PTC Computer Solutions, IT Specialist, and an active real estate sales professional with Barclay’s Real Estate Group based in Jacksonville, FL. He is also a principal partner of the REMA Team of professionals. He can be reached at 904-607-8763 or via email email@example.com.