Flight From Big Cities Continues to Change the Business Landscape

For months now I have been noting the huge migration out of big cities such as New York, Chicago and San Francisco. People are leaving these high-density and high-tax metropolises in droves it seems. The New York Times is even taking notice. It ran a story over the weekend highlighting some of the themes I have been covering for weeks. The flight to the suburbs from the Big Apple has gotten so bad that one three-bedroom house in East Orange, N.J., that was listed for $285,000 had 97 showings over three days in late July. The house received 24 offers and the winning bid came in at more than 20% over the asking price. Westchester County saw a surge of better than 100% in home sales in July compared to one year ago. Meanwhile, apartment sales in New York City were down more than 55%. People in the suburbs of New Jersey whose homes aren't listed are receiving knocks on the door from brokers who are soliciting them to see at what price they might be willing to sell. I have a friend who has a place in Poconos where he is working remotely and says you can't swing a cat in his town without running into a real estate broker. This move to the suburbs also is showing up nationwide via the surge of home sales, housing starts and building permits in recent months. Lumber prices have more than double since April. One beneficiary of this great migration is Amerco , known for its ubiquitous red-and-white U-Haul moving trucks, trailers and vans. The company crushed earnings expectations when it reported quarterly results on Aug. 5. Two weeks later, the company declared a 50-cent special dividend. Looking at the videos over the weekend of lines in Manhattan at U-Haul pick-up facilities, I think the company has many good quarters ahead. Moving companies seem to the one business in New York benefiting greatly from the pandemic. Driven by a surge in crime, homelessness and the desire for more space after months of sheltering in place, the flight to the suburbs is unlike anything we have seen since the 1960s and '70s. New York is not the only city experiencing this outmigration, but it does seem to be the epicenter. The Big Apple has recovered from many a crisis in the past, such as 9/11 and the financial crisis in this century. Famous New Yorkers such as Jerry Seinfeld and others continue to say this time will be no different. I am in the opposite camp. I believe this time is truly different due to employers discovering the value of remote work and because the technology now exists to make it more seamless and productive than before. Only 10% of the office workers who left during the pandemic have returned to midtown Manhattan so far. Many companies have said they have no intention of bringing their employees back to the office until 2021 at the earliest. This is playing out in other major cities. Pinterest just paid a nearly $90 million fee to cancel a huge lease in San Francisco, citing the shift to remote work as the reason. This obviously is going to put commercial real estate concerns under tremendous pressure in coming years, which is why I am avoiding this entire sector of the market. This shift to remote work should continue to help the likes of Upwork , which I have profiled before. MKM Partners assigned a new Buy rating and $20 price target last week to Upwork, noting the company is still in the early days of capitalizing on an economy that is more open to remote, flexible, on-demand workers. I agree, and this is one of many names in my portfolio that should continue to prosper as the great migration out of our big cities continues.

Flight From Big Cities Continues to Change the Business Landscape

There are and will continue to be winners and losers as the outmigration from big cities isn't likely to abate anytime soon.

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