The Donut Effect of COVID-19 on Cities

Abstract

Using data from the US Postal Service and Zillow, we quantify the effect of Covid- 19 on migration patterns and real estate markets within and across US cities. We find two key results. First, within large US cities, households and businesses have moved from the dense central business districts (CBDs) towards lower density suburban zip-codes. We label this the “Donut Effect” reflecting the movement of activity out of city centers to the suburban ring. Second, while this observed reallocation occurs within cities, we do not see major reallocation across cities. That is, there is less evidence for large-scale movement of activity from large US cities to smaller regional cities or towns. We rationalize these findings by noting that working patterns post pandemic will be primarily hybrid, with workers commuting to their business premises typically 3 days per week. This level of commuting is less than pre-pandemic, making suburbs relatively more popular, but too frequent to allow employees to leave the cities containing their employer.

Keywords: Covid, working-from-home, real-estate, migration

JEL Classification: D13, D23, E24, J22, G18, M54, R3