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News Article

COVID-19 a Threat to Big Cities’ Appeal?

By Andrea Villar | Tue, 09/08/2020 - 18:13

Changes in the labor market and the pandemic have raised questions about the attractiveness of large cities for businesses and residences. Lockdowns around the globe and thousands of employees working from home opened the possibility for people to return to their homes outside the city and for several companies to consider a remote working scheme for the long term. 

In 2Q20, office demand in Mexico City fell 62 percent compared to the same period last year, according to real estate company Solili. During this period, 1,717,082m2 were available in the city, 549,101m2 more than in 1Q20. Currently, Mexico City concentrates 80 percent of the national office inventory. “The strong contraction in demand reported by Mexico City’s market in 2Q20 is due to the measures taken to contain the spread of the virus. Working from home stands out, as companies identified that there is no loss of efficiency on employees and costs are reduced,” explained the real estate company in an interview with El Universal. Higher unemployment rates and companies’ financing restructuring are among the factors that fuel inhabitants’ exile.

At the beginning of August, New York concentrated 4.6 percent of COVID-19 infections and 14.5 percent of deaths. The city represents about 2.5 percent of the US population but generates 4.5 percent of the national real GDP. "What this points to is the virtuous cycle in which highly productive people and businesses choose to locate in large cities. People and companies’ productivity is further increased by being in a city. This virtuous cycle is the reason why it is commonly said that cities are the engines of countries’ economies,” explains Oxford Economics in a study.

Renew or Perish

To cope with this situation, real estate developers are offering space in non-traditional locations and are looking for land on secondary avenues or in neighborhoods with a higher percentage of residential land use to build offices in less crowded areas. 

“At the end of 2019, our industry generated around 6 million direct jobs and 3 million indirect jobs. This number reveals the immense potential our sector has to contribute to the country. We are intensive in material resources and labor; therefore, we drive a large part of the productive chains when we carry out our projects. This peculiarity makes us very special. We can be the engines that create millions of jobs for those who are in more need. We can be that dynamo generating the prosperity that Mexico needs to pull through. Our sector plays a fundamental role in the economic life of the country; we are the support of more than 2 million families and we account for almost 6 percent of the GDP,” wrote for Mexico Business News last month Federico Cerdas, CEO of Global Businesses, a more than 18-year-old real estate developer.

But cities and governments will also have to face a reality uncovered by the pandemic if they are to regain and increase the cities’ appeal: addressing the social inequality they harbor. While the health crisis has struck all large cities equally, within cities there are areas that have been most impacted. 

By August, the municipalities of Magdalena Contreras, Tlalpan, Cuajimalpa, Xochimilco, Tlahuac, Iztapalapa and Alvaro Obregon have been the most affected by the virus, as they are home to the largest number of confirmed cases and deaths. According to an analysis by Expansión, of the 44 neighborhoods that are red spots in the COVID-19 epidemiological traffic light in Mexico City, 32 of them present a high or very high degree of marginalization.

"There is a group of factors that increase the risk of acquiring the disease in the most vulnerable groups. It starts with people's need to get out of their homes and earn the resources they need to eat and feed their families. Likewise, the risk increases in the public transportation system or the workplace,” Gerardo Chowell-Puente, professor of epidemiology and biostatistics at Georgia State University in Atlanta, said in a report. People with lower incomes are at greater risk due to conditions like obesity or diabetes because of poor nutrition and have less access to information about the virus, possible symptoms and where to get medical care, Chowell-Puente added.

Andrea Villar Andrea Villar Journalist and Industry Analyst