The changing lure of city cores

The under-appreciated influence of separation and relocation of business functions.

By Peter Elmlund.

After the suburban heyday of the 1960s, we saw a continuous movement back to our city cores, first slowly but over the years faster and faster. A prevalent narrative about this re-urbanization is that it was motivated by changing lifestyles. Yes, abandoned industrial sites offered exciting and cheap places to be claimed by baby boomers coming of age in the 1970s. New urban cultures developed there. But the whole process was interwoven in a mesh of technological, economic, and social changes. It is not so simple to sort out the key factors.

An essential but overlooked factor is the urbanization of economic activities. It was not only individuals that moved into the city from the outskirts but also companies, and they brought employees with them.

In this process, we can at least point out one key factor, and that is the development of advanced telecommunication, which had profound implications for the organization of larger companies. Up to the 1960s, almost all factories and headquarters had to be located at the same site; but with the new technology, it became possible to separate them spatially. In the following decades, more and more headquarters were relocated into city centers or to larger cities, while the factories stayed in the countryside or were moved abroad to exploit cheaper labor.

In the new urban environments, headquarters were able to downsize their organizations because it was more efficient to buy services from nearby highly specialized firms. The business-to-business sector began to grow in cities, and with it, the number of amenities. Now cities became more and more livable, gentrified, and attractive in relation to the low-density suburbs.

Later on in the new millennium, with the development of the Internet and the globalization of the economy, the separation between different parts of companies took new and even more advanced forms. The relocation process resulted in new cluster formations. Sociologist Saskia Sassen and others have pointed out that some cities became highly specialized nodes in the global economic network. This process led to a feedback cycle, increasing the fast influx of people and economic activities to larger cities, but also growing gentrification, displacement, and loss of affordable housing. It was urbanization on steroids!

This short and somewhat simplified description of the connection between IT, economy, and the current urbanization process can be summarized as separation and relocation of functions.

Will this process continue to reshape our cities? I think so. In these corona times, a large part of the world's workforce has now learned to work from home. Many commentators have pointed out that this experience is likely to change work-life forever. The process was already well under way before the virus, but it seems certain to accelerate. We will mix work from home with work at the office, or work from cafés, or co-working places closer to home. Distance work will increase. When people can more easily choose the geographical location for their work, they will use that opportunity. We know from surveys that many people would move to small cities, towns, or the countryside if they could. Many will seek out lower home prices and subsequently move to the suburbs or exurbs – and these places could, as a result, be transformed into something more urban than today.

Another related process is the changing character of work, particularly as the freelance sector is booming. According to a report in Forbes Magazine, more than half of the American workforce will be freelancers in a decade. We will probably see clusters of freelancers in certain parts of our cities and suburbs as a result of both economic agglomeration advantages and lifestyle choices.

I suspect that we will see a dramatic change of the urban-suburban landscape in the coming years: IT-driven separation and relocation; propelled further by the coronavirus epidemic and high cost of housing.