The Donut Effect of Covid-19 on Cities

Using data from the US Postal Service and Zillow, we quantify the effect of Covid-19 on migration patterns and real estate markets in US cities. We find three key results. First, within large US metro areas, households, businesses and real estate demand shift from central business districts (CBDs) to lower density suburbs and exurbs. We label this the “Donut Effect”, reflecting the hollowing out of city centers and growth of suburban outer rings. Second, we observe sizeable donuts in large cities, smaller donuts for mid-sized cities and essentially nothing for small cities, on average. Third, most households leaving city centers move to suburbs of the same city, some move to small metros and few move to rural areas. To rationalize these findings we note that post-pandemic working patterns will typically be hybrid, with workers commuting a few days a week. This is less than pre-pandemic, making longer commutes more common, but is frequent enough to keep most, though not all, workers near their place of work.