COVID-19's Effects on Urban Centers

COVID-19 is a threat to urban centers, both in the short- and longer-run. Most immediately, the virus is doing serious economic damage to the most urbanized areas around the world. It is clear that the virus is transmitted most quickly and virulently in densely populated areas. It has also shutdown global trade, travel, immigration, and investment, all of which are key economic drivers of large cities. The shutdowns will eventually end, but only slowly, at least until there is a vaccine or an effective treatment for the virus.

It is difficult to gauge the longer-run implications for COVID-19 on urban centers, but it is likely to diminish them. Globalization was already on its back heels before the virus, as governments have become more inward looking and populist since the financial crisis. This seems set to only intensify given the severe economic downturns and high unemployment caused by the virus.

The necessity of working at home because of the shutdowns will almost surely change the way people work. Instead of commuting long distances to take jobs in large office towers in urban centers, workers will work and shop more often from the comfort of their homes. The current rapid adoption of new technologies that facilitate working remotely will reinforce this trend.

Urban centers will remain a critical source of economic growth, as they will continue to be the fountain for new ideas, creativity and innovation. However, COVID-19 likely means that the urban fountain will flow less freely, at least for a while.

Mark Zandi is Chief Economist, Moody’s Analytics, and a Penn IUR Fellow.

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