Bloomberg News

City Centers in U.S. Gain Share of Jobs as Suburbs Lose

April 18, 2013

City Centers in U.S. Gain Employment Share as Suburbs Lose Jobs

City centers gained a greater share of employment than their outer rings between 2007 and 2010, according to a report today from the Brookings Institution. Photographer: Scott Eells/Bloomberg

The deepest downturn since the Great Depression has interrupted a decades-long trend of jobs steadily moving to the suburbs and hollowing out urban business districts across the U.S., a study finds.

City centers gained a greater share of employment than their outer rings between 2007 and 2010, according to a report today from the Brookings Institution. It’s not all good news -- big suburban job losses, not large downtown gains -- drove the shift and metropolitan economies are more decentralized than they were in 2000.

What’s heartening is that the shift slowed during the downturn, said Elizabeth Kneebone, author of the report and a fellow at the Brookings Metropolitan Policy Program in Washington. The report follows up on a 2009 study that found a continuous migration of jobs from downtown to the suburbs between 1998 and 2006.

“The recession stalled the trend but didn’t reverse it,” Kneebone said. “Absent policy changes as the economy starts to gain steam and regions are growing again, there’s every reason to believe that trend will continue.”

Urban revitalization and the notion of smart growth, which seeks to cluster housing and jobs near transit and entertainment, has had only limited success restoring downtowns.

Related: The Best Big Cities for Renters

Now, faced with tight budgets wrought by the housing collapse, some metropolitan leaders say they’re redoubling efforts to nudge employers and workers toward locations that maximize the use of transit and existing infrastructure, cut pollution and improve quality of life.

‘Scattershot Approach’

“In the business of economic development we can’t afford to take a scattershot approach anymore,” said MarySue Barrett, president of Chicago’s Metropolitan Planning Council. Putting jobs near housing and rail, and vice versa, reduces commuting times, cuts household expenses and lowers government costs, she said.

When Courtney Klein Johnson, 29, and her partner opened their new business incubator near downtown Phoenix last February, she leased space in a once-bankrupt building near a commuter rail line even though she was living 90 minutes away and it would have been easier to find an office near her house.

“Young companies are moving here -- it was important for us to be right in the heart of that activity,” said Klein Johnson, co-founder of Seed Spot, which helps entrepreneurs start ventures that improve their communities. “The entrepreneurial vibe necessitates density -- density of ideas, people, culture. We have seven law firms and three banks surrounding our building. It’s an accessible place for these startups to get connected.”

Silicon Valley

It’s not just where to put the jobs, it’s where to put the workers. A coalition of San Francisco Bay-area governments wants to add transit and housing to Silicon Valley’s sprawling office parks to create mini urban centers. Washington, D.C., once a void of boxy office buildings that emptied out at night to surrounding suburbs, is experiencing a revival, adding 1,100 new residents a month, according to Harriet Tregoning, director of the city’s office of planning.

Construction, manufacturing and retail were among industries hardest hit by the housing downturn and subsequent recession and helped stall the jobs sprawl. The industries accounted for almost 60 percent of job losses between 2007 and 2010, Kneebone said. Half those losses occurred 10 miles or more from a downtown.

Banding Together

Chicago’s Southland, once a thriving industrial center, had already been hammered by a manufacturing decline in the 1980s and 1990s when it was hit by the housing collapse and recession. Now, 42 municipal governments in the region have banded together to use federal housing, environmental and economic development grants to convince manufacturers a city location makes economic sense.

“In some ways the ideas that we should’ve been doing all along become relevant during tough times,” Barrett said. “The core concepts are perhaps not new, but there’s an urgency. We can’t make unwise decisions because resources are so limited.”

The San Francisco Bay area has relied on office-park sprawl to accommodate its growing technology community. Now area leaders are trying to draw some of those companies to downtown San Jose, San Francisco and Oakland. Two years ago, Twitter Inc. said it would expand its workforce in downtown San Francisco, signing a lease in central Market Square after the city exempted it from a local payroll tax.

Technology Jobs

Since then, technology jobs in the city have surged 50 percent to 42,326, while the number of tech companies has jumped 20 percent to 1,826, according to state data through the second quarter of 2012 analyzed by Colin Yasukochi, director of research and analysis at brokerage CBRE Group Inc. in San Francisco.

“Can we say it’s a full-blown reversal? We’ll have to wait and see,” said Miriam Chion, director of planning and research at the Association of Bay Area Governments in Oakland. “The recession gave us a pause to collect our thoughts and look with calm perspective at what the trends were and where we could take advantage of more sustainable development in environmental terms but also in economic and social terms.”

Since the end of 2010, offices in central business districts have recovered faster than their suburban counterparts, with vacancies falling to 14 percent at the end of 2012, when suburban vacancies were 18.8 percent, according to data firm Reis Inc. in New York.

Bigger Share

Between 2007 and 2010, the central business districts of 54 of the nation’s 100 largest metro areas gained a bigger share of employment, Brookings found, led by Chattanooga, Tennessee, Louisville, Kentucky, and New Orleans. Only four regions had absolute downtown job gains: New Orleans, Cincinnati, Charleston, South Carolina, and Austin, Texas.

Related: Top 12 American Boomtowns

Areas experiencing the greatest increases in jobs sprawl during that time period were Cape Coral, Florida, Little Rock, Arkansas, and San Antonio.

In the Phoenix area, Klein Johnson is going against the grain. Between 2007 and 2010, that city’s jobs sprawl actually worsened, with the share of jobs near the central business district falling to 18.1 percent from 18.8 percent, Brookings found. At the same time, employment in the outer ring grew to 46 percent from 44.5 percent of the region’s total.

Two weeks ago, Klein Johnson bucked the Phoenix trend a second time when she and her husband gave up their yard and suburban cul-de-sac for a home about a mile from the office.

While she enjoys the “buzz” of downtown, what’s important for the 56 startups and their 75 workers are the business opportunities near the location her non-profit offers.

“Think about where those employees spend their money,” Klein Johnson said. “They’re spending it where they live. The more proximity you can get around office and home and life, the more those taxpayer dollars and their spending power stays in their city.”

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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