Editor’s note: After decades of decline, many U.S. cities are showing signs of rebirth. This three-part series examines a little of what happened to pull people and development away from cities, what’s attracting them back, how shrewd private investors are spotting trends, and what institutional investment and redevelopment projects have done to bring some cities back to life. (Read Part 2, “Local knowledge key for small investors in urban areas,” and Part 3, “Redevelopment and institutional investment in shrunken cities.”)
A century ago, cities boomed as waves of industry and immigration first filled urban centers, then forced expansion outward. From 1810 to 1910, Pittsburgh, Pa., experienced more than 50 percent growth every decade except one, swelling a hundredfold from a small village of 5,000 to over half a million in that time and becoming the eighth-largest city — and the fourth-densest — in the country. (By contrast, total U.S. population increased only about twelvefold during the same period.)
But in the five decades following World War II, Pittsburgh lumbered along with a population that eventually sank below half its 1950s’ peak of nearly 700,000. Census figures for dozens of other cities tell a similar story: Wilmington, Del., fell to 65 percent of its peak population; Buffalo, N.Y., around 50 percent; and Detroit, most famously, around 45 percent.
Now, after 50 years of decline, many cities are showing signs of rebounding. City centers in particular are experiencing a renaissance, even as noncore areas continue to decline. Knowing what parts will return, and how to best capitalize on such changes, presents opportunities for canny investors.
But to know these cities’ futures, we need to study their histories. What happened to these once-great behemoths?
That was the question addressed by the three-year Shrinking Cities project sponsored by Germany’s Kulturstiftung des Bundes (Federal Cultural Foundation), which examined four shrinking urban areas in the U.S. and Europe. It resulted in publications including two volumes and an atlas, a Web site, and exhibitions in Europe, Asia and the U.S. — including the dramatically shrunken cities of Detroit and Cleveland.
The study found that, generally speaking, deindustrialization and postwar suburbanization were to blame, although sometimes unusual circumstances affect specific cities or regions. Just as ex-Soviet cities such as Ivanovo suffer from “postsocialism,” for example, cities such as Rochester, N.Y., go fallow as major employers (Kodak, Xerox, Bausch & Lomb) diminish their local presence. And of course Hurricane Katrina changed New Orleans’ population from 450,000 people to about 90,000 immediately afterward; however, it’s since returned to about 275,000, and continues to grow. When — or if — New Orleans will reach its pre-hurricane apex is anybody’s guess.
Meanwhile, suburban populations grew steadily as city centers shrank, resulting in “donut cities” where a strong and growing economy surrounds an older urban “hole.” Often, a metropolitan area as a whole will not reflect a decline in city population and can even contradict it. Such is still the case with Detroit: The city proper’s estimated population shrank by approximately 8.5 percent since 2000 to under 900,000 in 2006, while the metropolitan population of nearly 4.5 million remained stable, and one of its largest suburbs (Sterling Heights) grew by almost 3 percent in those six years.
Regional changes also affect the amount and pattern of city shrinkage. The inland Northeast suffered the deepest and most continuous losses since 1950, with particularly heavy carnage among inland cities whose economies were supported by materials processing and manufacturing. The list includes nearly every city in the “rust belt“: Scranton, Pa. (steel, iron, coal); Akron, Ohio (rubber); and Erie, Pa. (transportation) join the decline of previously mentioned, larger cities in the area.
Cities on the East Coast, however, started enjoying rebirths as early as the mid-1980s. Artist communities of that time helped spur New York City’s rejuvenation, even as its condition a few years earlier was so bad that insurance-fraud arson swallowed swaths of The Bronx.
President of ARC Properties Robert Ambrosi believes that the New York-to-Washington corridor is now a comparatively safe investment because of its density. “The stretch between New York and Philadelphia is becoming one big city, just like between Baltimore and Washington,” he said. “It’s hard to tell where one starts and the other begins. There are even people who live in Baltimore and commute to D.C. because it’s cheaper!”
Midwestern cities have been comparatively stable, buoyed by business and finance as well as their historical agricultural bases. Chicago and Minneapolis lost some population in the ’70s and ’80s, but not nearly to the extent of their eastern sisters.
Cities in the South and West, on the other hand, have not experienced much loss at all. Three factors account for this: First, few western and southern cities were highly urbanized before the second World War, and therefore one could still enjoy a suburban life there while living within city limits. Second, the economies of those areas weren’t as dependent on heavy industries that declined so dramatically in the Northeast. Third, southern and western cities benefited from the nearly uninterrupted growth of those areas overall. In one extreme example, Dallas grew over 10 percent during the 1980s, despite the collapse of the domestic oil industry in that decade, and averaged about 23 percent growth in each decade between 1950 and 2000. Atlanta, Nashville, Miami and most California cities have similar tales to tell.
Now, Ambrosi believes that populations are shifting northeast again. “There’s even a name for people who moved far south, then realized they didn’t want to be in the sun all the time,” he said. “The ones who moved halfway back to the Carolinas are called ‘halfbacks.’ “
Which cities will return?
So will cities return? And if so, which?
One feature to examine relates to oil prices. Put simply, non-urban living demands more oil and gas use, as homes, workplaces and retail areas are often too distant from each other to comfortably walk or bicycle. Increased oil prices also affect infrastructure costs: The energy needed to build and maintain a mile of road is the same whether it serves 500 people or 5,000. Therefore, fortune will likely favor urban areas that are walkable, whether developed that way by history or through “new urbanist“-style projects.
Secondly, consider the city’s past performance. Is it undervalued compared to its neighbors? Have years of attrition given a now-growing city an unjustifiably bad reputation — and unreasonably low values? Decennial census figures authoritatively tell part of the tale, while government estimates fill in the gap since 2000. And the “demographics” sections of some cities’ individual pages (such as Cincinnati on Wikipedia) provide at-a-glance views of how populations changed every decade, often with background explanation.
Finally, cities that can successfully move away from reliance on failing industries will do well. Many cities whose economies formerly rested on heavy industry, such as Cleveland and Pittsburgh, are following Baltimore’s lead by exploring salvation in the “cleaner” area of biotechnology. (Baltimore’s John Hopkins Hospital and Johns Hopkins University are major centers for biotechnology research.) Meanwhile, others, such as Atlanta, have already successfully rebranded themselves as financial and corporate centers.
In any case, the outlook for cities is good. As Senior Fellow at the Urban Land Institute and former Mayor of Pittsburgh Tom Murphy said, “I think a large part of (urban growth) is demographics. The population is moving from what we would call an Ozzie and Harriet concept of development — mom, dad, two kids, white picket fence — to households that are far more diverse,” he said.
“When Ozzie and Harriet were TV stars, about 76 percent of families looked like that. But the current percentage is right below 50 percent, the remaining divided among different household types, the largest being singles. We see that in cities, with buildings being converted with young people. The second group is the one I would represent — empty-nesters. (My family has) always lived in Pittsburgh, but for a lot of folks who raised their kids in a four-bedroom house, that’s not as appealing after they’re gone as living in the city and being able to walk to things. And if you’d said 15 years ago that people would be living in downtown L.A., they wouldn’t believe you.”
Tom Geller is a freelance writer in San Francisco.
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