Long-held beliefs can sometimes change surprisingly quickly. The coronavirus crisis had barely taken hold in Europe before some experts began talking about a paradigm shift. The age of urbanisation was over, they declared. City centres would lose their attraction due to high population density and the associated risk of infection, with rural areas becoming a new utopia. “People spent a lot of time at home and began rethinking how they want to live going forward,” said Michael Heming, for example, President of FIABCI Deutschland, a global association of real estate professionals. “Many of them realised there was something missing in the city, namely room to breathe and the individual freedom offered by the great outdoors.” The result was increased interest in homes in the countryside.
If this forecast were to prove correct, it would mean a radical change in how space is organised and used because urbanisation has been regarded as a core trend for many years. According to a study entitled “Cities in the World: A New Perspective on Urbanisation” by the Organisation for Economic Cooperation and Development (OECD), the number of city dwellers worldwide rose from 1.5 to 3.5 billion people between 1975 and 2015. It’s estimated that by 2050, upwards of five billion people will live in cities.
This trend has been particularly apparent over the past decade in Germany. Munich, Leipzig, Berlin, Hamburg – these and other cities saw a marked rise in the number of residents, with new arrivals coming particularly from rural areas. By contrast, with few exceptions, peripheral regions have experienced a steady loss in population.
Are rural areas about to see a renaissance?
Could that be about to change? Until recently, rural areas were viewed as dystopias of contraction and decline, notes Stefan Schneider, Project Manager at the German Institute for Urban Studies. Despite that, the advantages of rural areas are clear to see, he points out: “plenty of space and cheap housing, opportunities for individual self-fulfilment, natural or at least unbuilt-on landscapes.” The prestigious institute takes things a step further by painting an extreme scenario: “Those who can, will move out of the city and become self-sufficient – then earn good money supplying deprived city dwellers with food.”
The mainstream media are currently full of stories about urbanites moving to the countryside in search of greener pastures. But individual choices of this kind are “insignificant in terms of the real estate sector as a whole,” says Andreas Schulten, senior manager at consulting firm bulwiengesa. The far more interesting question for Schulten is how to go about making smaller cities more attractive. “Because from an economic perspective,” Schulten argues, “it makes absolutely no sense to simply give up on entire cities while metropolitan areas are simultaneously bursting at the seams.”
The working-from-home effect
The likelihood that locations outside major cities will gain in popularity may rise in the wake of the coronavirus crisis. “Further expansion of digital infrastructure and increased adoption of working-from-home arrangements make rural settings more attractive, thereby reducing the polarisation between city and countryside,” comments Angela Mensing-de Jong, Professor of Urban Design at Dresden University of Technology. Stefan Schneider of the German Institute for Urban Studies likewise notes how the “coronavirus innovation effect” has reduced the disadvantages associated with living outside of urban centres. “The latest digital services make it possible to access cultural and educational programmes while enjoying rural life; the two are no longer mutually exclusive.”
The growing acceptance of working from home and other remote working options is also having an impact. “If employees no longer have to travel to their office in town every day, then areas on the urban fringe become more important for housing,” says Peyvand Jafari, managing partner at the Plutos Group, a firm involved in the residential and office property sector. Jafari doesn’t expect to see a wholesale switch to home-working, but he does anticipate an increased trend towards remote working. “And that,” he says, “will result in the rise of a different type of co-working on the periphery of larger cities.” Companies will make use of these new types of co-working spaces by leasing five workspaces for 15 employees who live nearby, for example.
Offices can be relocated from downtown to the suburbs, where property is cheaper, says Michael Voigtländer, a real estate expert with the German Economic Institute (IW) in Cologne. But bulwiengesa expert Andreas Schulten disagrees: “Decentralised office space will not be a main beneficiary of the crisis.” A company like Delivery Hero, which recently joined Germany’s foremost index, the DAX, cannot be “located in an area of town dominated by drab prefab high-rises, like Berlin’s Hellersdorf district,” says Schulten – not if it wants to attract young, hip employees, that is. When large companies like Allianz and Siemens announced they were allowing employees to work from home, they were essentially engaging in nothing more than “PR bluster”, according to Schulten, because plenty of employees were already working remotely prior to the coronavirus crisis.
Offices can be relocated from downtown to the suburbs, where property is cheaper
Suburban areas set to grow
In any case, Schulten points out, the idea that everybody is moving to the cities is wrong. On the contrary: suburbanisation is actually the norm in Germany, he says. “The reurbanisation that was a feature of the period from around 1995 to 2015 was the exception to the rule, and attributable to the availability of a plentiful supply of affordable housing,” Schulten explains. Now that housing prices in city centres are on the rise again, more people are turning to the surrounding areas.
“Starting in 2018, the urban periphery began seeing population gains,” agrees Thomas Beyerle, chief researcher for Swedish investment management company Catella. This means that the pull of urban areas will persist – though these urban spaces will comprise not just urban cores but also the surrounding communities as well as small towns in the broader periphery that enjoy good public transport links to the metropolitan area.
Importantly, this trend is not confined to Germany. According to Catella’s researchers, it’s likely that “Europe as a whole will see a growing exodus from rural areas and, as a consequence, internal migration to large cities and their environs will continue to increase.” In other words, it’s unlikely that coronavirus will completely reshuffle the deck.
By Christian Hunziker