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Updated: May 4, 2020

As COVID-19 ravages big cities, CT’s suburbs could become more attractive

Photo | blvdone,

Department of Economic and Community Development Commissioner David Lehman has been busy lately, working all hours to help Gov. Ned Lamont and his other top advisors plot a strategy for reopening Connecticut’s economy.

But that hasn’t stopped him from noticing a few intriguing emails that landed in his inbox recently.

They were from individuals interested in moving their New York City companies to Connecticut.

David Lehman, Commissioner, State Department of Economic and Community Development

While they didn’t say it explicitly, Lehman said their outreach was likely precipitated by a desire to flee a densely populated city that has become ground zero of a deadly global pandemic.

“I do think there could be a migration of businesses and potentially individuals to more suburban settings,” in the wake of the coronavirus, Lehman said. “And I do think suburban Connecticut could benefit a little bit from that, at least in the short term.”

COVID-19’s devastating health, social and economic effects have raised many questions about what life might be like once the economy begins to reopen, particularly related to where people might choose to live and work.

Some of the largest U.S. cities, which were already losing their luster prior to coronavirus, have been particularly hard hit by the pandemic — a recent study found that more than one in five New York City residents have tested positive for the disease — raising the prospect that city dwellers might seek refuge in smaller urban centers, or the suburbs.

That could give Connecticut, long known as a suburban state, an economic advantage, given its proximity and connectivity via Metro-North to New York City.

Most experts, including Lehman, agree it’s too early to say if there will be any notable population shifts, but there has been a spike in anxious New Yorkers seeking short-term rentals in Fairfield County, realtors and others say.

Joe Brennan is retiring as CBIA's president and CEO.

“Density is really a problem going forward whether it’s for businesses or individuals,” said Joe Brennan, president and CEO of the Connecticut Business & Industry Association. “I’m sure there are probably some people who are in apartments in New York or Boston, or some of the larger metropolitan areas, who are saying ‘once I get through this I may want to re-think my living arrangements.’ ”

Adding to the uncertainty is the sudden and widespread adoption of telecommuting, which many experts say is likely to become a more permanent fixture in the way companies operate, reducing the need for office space and to live near where you work.

Suburban reversal?

There is a bit of irony in suburbs potentially being back in vogue, since many experts in recent years have blamed the state’s lack of vibrant cities for contributing to Connecticut’s economic decline.

A key part of Lehman’s economic-development strategy has been to focus on building up the state’s cities, and he’s not backing away from that. He said he still thinks cities are the future long term, particularly Connecticut’s smaller urban centers, which don’t have nearly the population or density of New York City.

A recent analysis by William H. Frey, of the Washington D.C.-based think tank Brookings Institution, found that the country’s largest metropolitan areas — including New York, Los Angeles, and Chicago — have actually been losing population in recent years as a strong economy gave aging and increasingly family bound Millennials and others the “wherewithal to find jobs and homes in suburbs and more parts of the country, which were not available to them in the immediate aftermath of the 2007 to 2009 Great Recession.”

Connecticut hasn’t been able to take advantage of that trend, as its fiscal woes and lack of job growth over the last decade have coincided with declining population in the last few years.

The metro Hartford region has also seen its population shrink in each of the last five years, according to U.S. Census Bureau data.

However, Connecticut has bested New York in the migration battle. Over a nine-year period starting in 2010, Connecticut gained a net 76,536 residents from the Empire State, according to an HBJ analysis of U.S. Census Bureau data.

And the pace of New Yorkers moving to Connecticut has picked up in the last few years, Census data shows.

Now, all eyes are on what might happen with population shifts in the wake of a once-in-a-century pandemic, especially if such outbreaks become more common, which some scientists say is likely.

On one hand, a prolonged economic downturn could force people to stay in place.

“On the other hand, large metropolitan areas and cities — especially those at the center of the pandemic — could become less immediately attractive to movers than they were in the early 2010s,” Frey wrote.

Americans have been increasingly staying put for nearly four decades, so a sudden spike in migration would counter a long-standing trend, according to Thomas Cooke, a UConn geography professor who says stagnant wages and the rise of dual-income households, higher internet speeds and other telecommuting technology have led to a national state of “permanent rootedness.”

Still, post-coronavirus migration potential bears watching, says Lehman, Brennan and other economic-development experts, though there are no plans right now to make that part of the state’s formal marketing strategy, given the sensitivities around the pandemic and the fact that Lamont is working closely with New York Gov. Andrew Cuomo to deal with it.

“I’m not sure it’s something we should be promoting or going after right now, but the state and various regional and local levels of government should be prepared to accommodate firms that are looking for space in Connecticut, regardless of what the reasoning is,” said Donald Poland, an urban planner with real estate advisory firm Goman+York.

David Griggs, CEO, MetroHartford Alliance

David Griggs, CEO of the MetroHartford Alliance, which counts company recruitment among its aims, agrees that Connecticut should not try to exploit New York City, which has suffered from COVID-19 more than any other metro area, with nearly five times the infections per capita as Hartford, as of mid-April.

Marketing the Greater Hartford region to New York and Boston firms has been and will continue to be part of the state’s and region’s strategy, but Griggs said the focus should remain “who we are, what we’re great at and who should be here.”

“We don’t want to take advantage of New York getting hard-hit,” he said. “We don’t want to pirate. We need to be a good neighbor.”

Pandemic’s impact on location, recruiting decisions

When conditions return to something more normal, many predict that workplaces as we knew them will not.

Telecommuting is likely to become the new norm for more companies, many experts agree, which could change where businesses and talent locate and shift state and local governments’ economic-development strategies.

“I think everyone was testing the waters on remote working for the last 20 years, but now we are in a great experiment, and I think we are realizing the strengths of it as well as some of the limitations, but my feeling is that when we come out the other side of this, it’s going to be more of a norm,” said Poland, the urban planner. “That really does change the landscape of where firms locate and where individuals locate.”

From a recruiting standpoint, he said, more telecommuting means firms will have a wider labor pool to draw from, while individuals no longer have to move for a new job. Workers are more likely to choose where they live based on what lifestyle they prefer, or where their families and social networks are, rather than job prospects.

“That may further undermine the notion that we may need to cluster together in large cities,” Poland said.

Tom Stringer, managing director and practice leader of site selection and incentives at BDO, an international accounting and consulting firm, said economic development has historically focused on attracting firms, and companies located places based on access to resources, talent and customers.

But a rise in remote working could flip that notion on its head, especially if people have the ability to live wherever they want, regardless of where their job is located. Communities, he said, might want to focus more on attracting highly paid individuals, rather than companies.

“If you have more highly paid and skilled people working [in a community], that changes an economy maybe more so than an employer,” in terms of its impact on a tax base, Stringer said.

For employers deciding where to base their people and infrastructure, the pandemic may also accelerate a trend that’s already been occurring — spreading out operations across multiple locations for purposes of disaster backup, redundancy and other factors.

“The idea of operating from multiple locations has been around for a long time for a whole host of reasons,” said UConn economist Fred Carstensen. “And it’s not just the coronavirus — it’s flu, it’s security reasons, having backup for critical functions so you can work 24/7.”

Diversifying corporate locations will ramp up moving forward, Carstensen predicts, and Connecticut’s often-touted proximity to New York and Boston may pay dividends as companies look to maintain locations nearby.

But he worries any benefits to Connecticut may be lost due to what he has long criticized as a lack of state investment in big data infrastructure.

“If we had better IT infrastructure we would be able to do more,” he said.

Cooke said it makes sense that some employers will decide to further spread out after the pandemic, though he doesn’t predict any massive migration wave.

“It could be an important hedge to make,” he said. “Real estate values are probably down and probably will go down.”

A return to ‘normal’

As Nutmeggers long to put COVID-19 in the rearview mirror, Carstensen and fellow economist Donald Klepper-Smith, of DataCore Partners, say it’s worth remembering that Connecticut’s pre-pandemic economy wasn’t doing great.

The state never fully recovered the 120,000 jobs lost in the last recession, and its inflation-adjusted GDP growth has been nearly nonexistent since then.

Klepper-Smith said Connecticut may lose more jobs per capita than other states in the coming (or current) COVID-19 recession, due to the state’s reliance on financial services jobs. He expects at least as many lost jobs in Connecticut this time around as in the Great Recession, and he doesn’t portend a snappy V-shaped recovery.

“Consumption doesn’t come back like that,” he said. “There is a sea change in personal consumption after this. You don’t go back to things the way they were before.”

Carstensen said the state needs a new economic direction post-pandemic, one that will bring more high-paying jobs back to the state.

“We were headed in the wrong direction for a decade, with job creation in low-wage, low-skill” sectors like tourism, hospitality, home health and nursing homes, he said.

The ongoing slowdown is certain to be a “big net negative” for Connecticut in the short run, Carstensen said. The long run is what’s up for grabs.

“This is one of those moments where everything is on the table. So the question is, how do you respond?” he said.

Klepper-Smith agrees. While the state may gain some jobs from New York in the wake of the pandemic, Connecticut may just as easily see some of its jobs move south. So, no one should count on post-pandemic migration solving the state’s long-standing economic challenges.

“If we can see the state of Connecticut making meaningful policy changes to promote business confidence, then it’s very well within the realm of possibility that we could see an influx of businesses,” Klepper-Smith said.

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