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The Essential Podcast, Episode 14: Rise of the Small City — The Limits of De-Urbanization


The Essential Podcast, Episode 57: A Machine for Manufacturing Courage — Venture Capital and the Power Law


The Essential Podcast, Libsyn Test


The Essential Podcast, Episode 56: The Myth of Growth — Sustainability, Equality, and the Search for a Post-Growth Economy


The Essential Podcast, Episode 55: Investing in Culture — Communication and Retention in Companies

The Essential Podcast, Episode 14: Rise of the Small City — The Limits of De-Urbanization

About this Episode

As knowledge-workers around the world have converted to work-from-home models, the costs and challenges of large cities are being re-evaluated. What factors are driving de-urbanization, and what are the countervailing forces that may keep people in cities? James Pomeroy, Global Economist at HSBC, shares perspectives on the potential winners and losers in a time of de-urbanization.

The Essential Podcast from S&P Global is dedicated to sharing essential intelligence with those working in and affected by financial markets. Host Nathan Hunt focuses on those issues of immediate importance to global financial markets – macroeconomic trends, the credit cycle, climate risk, energy transition, and global trade – in interviews with subject matter experts from around the world.

Listen and subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts,  Deezer, and our podcast page

Show Notes

Read the research discussed in this episode:


Nathan Hunt: This is The Essential Podcast from S&P Global. My name is Nathan Hunt. Over the weekend, I went for a socially distanced walk with a friend in a city park. I was shocked to learn that this friend, a long time Brooklynite, had just completed the purchase of a house in New Jersey. She was leaving the city. She gave the usual reasons—"space, garden, proximity to nature"but then she added, "It will make it easier to work from home, now that things are the way they are." De-urbanization is a word re-entering the popular lexicon. But now that cities are really emptying out, what changes are in store for our cities now that things are the way they are? To help answer these questions, I am joined today on the podcast by James Pomeroy, Global Economist at HSBC and the author of a recent article on de-urbanization entitled, "Leaving the City." James, thank you for joining me today. 

James Pomeroy: Thanks for having me.

Nathan Hunt: James, we have seen in a number of different sectors that the COVID-19 crisis has actually served to accelerate trends that were already in place. What were the trends in terms of remote work? And how has this played out during the last few months?

James Pomeroy: So over the course of the last decade or so, as we've all had more mobile communications, more people have had access to fast internet speeds, all of those sorts of things. We've seen a steady increase in the number of people who are working from home either part-time or full time. But those numbers were sort of ebbing along incredibly slowly in most parts of the world. They're looking at numbers in the sort of five to 10% of the population working from home one time or another, which is pretty low. To be honest, in some parts of the world, it was higher. Sweden stands out. Those numbers are about sort of a third of people work from home part-time or full time. But what obviously we've seen as a result of this crisis is the number of people working from the home shoot up and the chances are that is up in sort of 40 to 50, maybe an even higher percentage of the population, depending on which country you're looking at. In the UK, for example, we think it's around sort of 45% of the population at the moment. So a complete game-changer in that trend. And I say it was a trend that was happening, but it was just really, really slow and now it's really, really accelerated. 

Nathan Hunt: Is this likely to be a permanent change or is this just a circumstance where tolerating, while we wait to get back to normal? 

James Pomeroy: I think it stays around quite a lot. And one thing I've been thinking around this crisis is it's almost making us reevaluate the things we were doing before. Now, we've argued for a long time in some of the work we've done on cities over the past few years that people should be working from home much, much more. Just in general, it's more efficient, it's more useful for many jobs that allow you to work more effectively and so we think while this is a sort of a shock that's happened, it's making people realize actually, we can work from home efficiently and it's not just from a sort of employees perspective, I think employers have had to completely change the way they think about remote work. And so what we think is going forward is that shift is hard to completely reverse. So we think what you end up getting is a lot of people working from home, but it may well be that it's part-time rather than full time. So you get the sort of the best of both worlds that you have there, the ability to go into the office, and the benefits that that brings, but also the opportunity to work from home when it's helpful and when you need to. And I think that sort of hybrid situation is likely to persist in most countries. 

Nathan Hunt: But surely not everyone can work from home. We aren't all, to borrow an overused phrase, knowledge-workers. Who has the flexibility and who is likely to take advantage of it?

James Pomeroy: Yes, of course, this is a very difficult situation. You've got a few things that countries need for this trend to happen much, much more aggressively. Firstly, you need the right type of workers, so to speak, as you say, "knowledge workers", people who work in jobs that are very easy to do from home. It's much easier for me to do this job as an economist remotely. Whereas the previous jobs I've had in stacking shelves in a supermarket or being a five side football referee, I can't really do those jobs from home. So, there's clearly a big difference in that sort of set up across countries. But also very important is technological availability. Now, if you've got countries across the world where you don't have sort of widespread usage of laptops, which is the case in a lot of emerging markets and all you don't have the sort of sufficient internet speeds then actually becomes very hard to work from home. I think a lot of us have found in the course of the last three months or so that if you have sort of internet problems at home, it's incredibly frustrating and in large parts of the world, that makes it a bit trickier. So, yeah, sort of Northern European countries, North American countries, where you have both of those boxes ticked, I think you're much more likely to see this trend play out. 

Nathan Hunt: What are the social and economic implications of a change of this magnitude? After all, offices commuting and the proverbial water cooler are inextricably linked with how a business has been done since the second world war. 

James Pomeroy: Yeah, that's a very interesting question. And so if you think about some of the economic consequences, I mean, firstly, I think you're less likely to see people want to live in the center of cities. Now that's not going to be the case for everyone, but at the margin, that drawer of cities is taken away. So, currently, I can see the HSBC office in Canary Wharf out of the window of my flat. Now, do I need to do that or live that close to the office if I'm only commuting in once, twice, three times a week, rather than five times a week? Well, maybe not. So your decision about where you choose to live is going to change quite a lot more. You could then see some de-urbanization. One, I think you are likely to see is a lot of cities attract people in an interesting way. You know, you're still going to have the city trying to draw people towards them. You're still going to have the appeal of cities for a lot of people. And all of this means that city's going to look quite different. Now, if you have fewer people commuting in every day, you have a different sort of generation of people living in cities and all of these things, the businesses that operate there or exist there may have to change some of their models. There may well be that your coffee shops who rely on commuters, walking past in volume, they may struggle. But at the same time, what you could see is the coffee shops based in regional sort of towns or suburbs do very well. Because when you're working from home, you might want to break. You might go for a walk. You might want to sit somewhere else. You might want to meet a client for a coffee who lives nearby all of those sorts of things. So, I think what you could end up seeing is growth spread out of cities and to sort of across the whole country. I think that's an extremely positive economic development. And to me, that's a really interesting takeaway. But of course, you're going to see a change in the way we all work and how, how business is going to operate as well. We've all got so much more used to using Zoom and video chat and even just messaging colleagues much more frequently. And I think that's been very interesting. You could see a big dropoff in business travel. You could see a big drop off in all of these things that rely on us going physically to see people as we've realized how easy it is to do things remotely. So we could see a big change in the nature of work, even within the knowledge sector. Just because of the shift and I think that's quite exciting and it should hopefully fingers crossed, mean that we will work much more productively. 

Nathan Hunt: What kind of impact would you expect to see on, for example, the commercial real estate market from a shift toward working from home?

James Pomeroy: It's an extremely challenging time. I mean, if you think about it. Everything needs to be at the margin in terms of growth rates. And if at the margin, you have people who are moving out and working from home more. There are a few things that happened from this. Firstly, as I'm sure we've all found in the course of the last few months, is people shop online more because suddenly you don't need to worry about being in to receive a delivery. Now that's an important development in terms of how we shop and in terms of the demand for commercial real estate for retail premises. If you have fewer people going in and out to city centers for work, even if you go from five days a week to three days a week for half the population, that's a substantial drop in the number of people who are going past these sorts of places. So the amount of revenue, the amount of demand for even your simple things, like I mentioned, your coffee shops that are near offices, your pubs, your bars, or restaurants that make money off of that footfall, it becomes extremely challenging for them. And of course, in terms of offices themselves, it's an extremely challenging one because how would you play it? Well, you want it to provide an office for the people who want to go to the office who need to go to an office or feel like they should at least some of the time, or just wanted a bit of a break. So you need to provide a space for people to work. but does that space need to be the same site? How would you set it up? There's a whole load of questions there. So you may see slightly less demand for offices. You should see less demand for retail space and you almost certainly will see less demand for the likes of restaurants, bars, and coffee shops that rely on that footfall. 

Nathan Hunt: James, do you think this could kill or substantially reverse the worldwide trend towards megacities?

James Pomeroy: I think it could in the developed world, but maybe not so much in the emerging world. Now, most of the growth in megacities across the world is in the emerging markets. You've got cities across Asia, Latin America, and sort of coming through now, a lot of cities in Africa who were the biggest cities in the world, and that's where fastest growth rates are. And I think because of a lack of availability of computing power, internet speeds, and so on in those countries, it's much, much harder for these trends to take hold. And in the emerging world, you still have that draw towards the cities because actually ironically in the center of a city, in an emerging market is where it's easier to work from home because you've got that internet speed. So. It's a slightly different story. And that side of the equation in the developed world though, I think it's a very, very different story. And I think the appeal of living in central London or downtown in any sort of large American city or anywhere in Europe, it becomes slightly less appealing right now because you're dealing with high house prices. You do have this amazing social scene in these cities that people love. So now you've got to weigh that up a little bit more. You've taken away one of the pulls of these big cities. What I think is you could start to see some areas of countries do very, very well out of this places where people want to move to, because they're affordable places that people want to move to because there's still the social and recreational activities that people do really, really like in cities. But that affordability is important if you don't need to be able to commute every single day or even four or five days a week. Then suddenly you can weigh that up a little bit more. And I think actually the appeal of living in a megacity compared to a smaller city or a town or a suburb, it has been dramatically reduced due to this change in views, towards working from home.

Nathan Hunt: We've talked a little bit about the forces that are driving towards de-urbanization. Can you tell me a little bit about what are the countervailing forces that might lead people to remain in cities? 

James Pomeroy: Yeah. People like having fun. We may have spent the last three months of our lives, largely locked up indoors with all of our recreational and social activities closed down, but just look across the world. As soon as these things open, people are flooding back to them. People like these things, you just need to take a look at New Zealand over the weekend. They opened sports stadiums for the first time in three months, and they sell out in seconds. There's a demand for recreational social leisure activities, and you get those in cities. Now, as I say, there's a bit of a trade-off for some people, you know, if you're in your thirties and you're having a family, then actually do you need to pay high prices in London? Can you move out to a suburb and be better off as a result of that? And they think not having to commute every day, probably tips the balance in that favor. If you're 20, you've just graduated from university at 21, 22. However old you are. Do you really want to go and live in a suburb? Or do you want to live in a small town? No. You want to be out where the excitement is where people are, where ideas are, this sort of social element to our lives. It may not feel like that right now because we're in the midst of a pandemic where we've all been locked inside for three months, but that's going to change very, very quickly. And the encouraging thing for me, That we've seen in countries who have opened up a little bit more is that that rebound in those sectors can happen and it will happen. It just may take a little longer. I mean, the likes of the UK and the US are a little further behind in tackling the virus. but It will happen, but it could well be that it's the smaller cities that do very well because they're affordable. The jobs will be just as easy to do from there. And yeah, in the UK sense, it may be London loses out, but people aren't going to leave London and move to the countryside. They're going to leave London. They're going to move to your other vibrant cities in the positive situation there, is that could move people out of London then to the North of England, and that could help spread growth more geographically. And I think that would be an extremely positive development for growth more broadly. 

Nathan Hunt: I know it's hard to project, but how do you think cities will change demographically and economically as a result of these changes? 

James Pomeroy: The demographic point's really interesting because the cities historically have been, my young people have moved to, and then they've moved out, you know, sort of overtime. But you got in the development world, this sort of ongoing demographic trend where your number of young, new city movers is either slowing in terms of its growth rate or shrinking, in many cases as well. So it's particularly challenging sort of growth story anyway, but at the same time, what you're probably getting, there's a disproportionate number of older people within cities, I'm talking sort of 35, 50 sort of generation. Those people at the margin will probably now move out to cities. No, not everyone will, but some will. And they'll probably be disproportionately replaced by younger people. So cities will probably get younger. They may want to get more dynamic and that could be quite interesting and it could be interesting to see how cities develop in that way and economically, one thing that I think cities are going to have to do is appeal to people to stay there. I think this is going to be one of the biggest challenges for cities all over the world. Be it your large cities already have a lot of people. Well, your smaller cities who are trying to attract people. Now, you don't have that natural draw of workplaces. You need to now say to people will come and live here because we're going to give you this amazing quality of life. We have low crime rates. We have a load of green space. We have clean air because you can cycle everywhere. People are going to start really, really valuing these things. And I think this is another thing that's come out of lockdowns are people really appreciate open space. So if you can live near a big park where I'm fortunate enough that I do in Southeast London, then you appreciate, that's a fantastic thing to have on your doorstep. I think cities across the world will probably have to change the way they operate to attract people. And that may mean there are fewer cars on the road. It may mean. That there are better public transport provisions, more cycling, more pedestrianized areas, more sort of open squares for people to sit out and to, and intersocialize there. I think all of these changes could be particularly interesting in terms of servicing these new people who are going to come and live in cities over the coming decades. And I think this crisis has been a trigger to accelerate these trends that are happening anyway. And we were talking for a long time, not just about working from home, but about the need for cities to invest in improving their quality. The need for cities to invest in cutting down congestion, to improve their environmental performance, all of these different things. And again, this crisis has just completely accelerated the way we think about those things. And it wouldn't be surprising to me at all. If cities across the world were to be looking at those sorts of investments very, very closely right now we're a view to spend much, much more on making cities a better place to live.

Nathan Hunt: James, let's get to the really important question. My wife and I own our apartment in Manhattan. Is that a bad investment? 

James Pomeroy: Yeah. At the moment it would be very easy to say, yeah, it is a bad investment. I mean, because at the moment who's going to want to move to a city for the course of the next six to 12 months. And in all honesty, I think that's a big challenge. Now, if you live in a big city right now, The short term challenge is the demand for would want to move there. There's a lot of people who will be thinking, Oh, actually I can work from home outside. I'll leave the city. If you're a young student, I'll stay with my parents rather than moving into the city. And again, the marginal demand is down for the next year or so until we have the sort of normality really, really bad, but over the sort of longer-term, why not? There are still reasons why people want to live in Manhattan. Why do people want to live in London? I always said to people, you know, I moved to London, not because of my job. I moved to London because it's an amazing place to live like a young person. And then I got a job there and I think that's the same in a lot of cities and I think the challenge is going to be that you can draw people to your city by making it an appealing place and there are places that have got history, they've already got a good starting point in terms of good bars, restaurants, open spaces, those sorts of things will do well and they'll do okay. It just maybe a little time to come by. So my sort of a personal recommendation, maybe don't sell your apartment in the next year or so, but over the medium term, there's no reason why it should be a bad investment.

Nathan Hunt: Okay. Good, good news. One final question, James, you mentioned you worked at HSBC's London office in Canary Wharf? 

James Pomeroy: Yes. 

Nathan Hunt: I've been there at rush hour. It is quite crowded. What are your plans for work when the restrictions lift? 

James Pomeroy: Yeah, it's extremely interesting. I mean, Canary Wharf is a particularly crowded place. I mean, I'm fortunate enough. I live close enough that I can walk in and walk home or run home if needs be as well, which gives me the opportunity to commute in more often. I'm someone who over the course of the last few years has worked remotely quite a lot, either traveling for work or working from home or working from coffee shops or whatever needs be. And I like that sort of change of scenery. And we haven't had that obviously being working from my home the whole time. So I sort of see my future is working from the office maybe once a week, twice a week as is necessary. And other times it will be remotely in one form or another. And I think that flexibility is something that people will value. Going forward is that the ability to tilt work-life balance much, much more. And I think that's possible because of how this lockdown I'm working from home shift has sort of made people realize that just because you're working from home, you're not slacking. And I think that has been one of the biggest changes that's change the whole view towards remote working and that's an extremely powerful thing. So my idea is, you know, for the time being, we'll do a couple of days in the office. Most days at home, maybe you start going in there over the summer at some point, then we'll see how things develop. And they say it's partly the change of scenery, it's partly to work with colleagues, but I'm fortunate enough, I don't have to get on a train for an hour. I don't have to get on the London underground to do that. Whereas I think for a lot of people that caution will persist and it may be a long, long time before we see offices anywhere near the capacity they were at before.

Nathan Hunt: Thank you for listening to The Essential Podcast from S&P Global. To read more research and insights from James and his team, please visit

The Essential Podcast is edited and produced by Molly Mintz.