ring the Covid peak years but then returned to a more trend rate of growth in 2022, is a good example of this. The same thing happened with domestic migration patterns in the US. Population shifts that had been going on for years – from large northern and West Coast cities to the south – picked up speed in 2020 and 2021, and then slowed in 2022 and 2023. The flow of people could actually start to reverse if companies in the major cities manage to get their workers back into offices. But even if some of these domestic migrants return to their previous urban and coastal environments, there are still good growth opportunities for high-quality retailers in smaller cities and suburban areas in different parts of the country. And, as is often the case, the first-mover advantage will go to those who correctly anticipate where the population is moving, and why. Pandemic winners and losers To a certain degree, the story of pandemic-driven migration is still being written. The situation with remote workers remains in flux, and while the pressure to return to the office is mounting – from impatient companies with empty headquarters and leadership teams that believe in-person interaction is vital for getting the best outcomes – the population is unlikely to return to what it looked like in 2019. To understand why, it’s important to recognize that people left big cities during Covid for different reasons, and many of those who continued working for companies remotely are no longer within commuting distance of their corporate office. Ann Natunewicz, senior vice president of retail services at Colliers in San Francisco, which lost about 7 percent of its population during Covid, divides the country’s domestic migrants into two groups. “Some people left the area to live somewhere else, maybe even with mom and dad in Idaho, in the knowledge that the job opportunities would be there for them if and when they wanted to come back,” Natunewicz told Inside Retail. “Then you had the people who wanted a real life change, who were tired of the lack of affordability, the crime and all the other problems, and who moved out for good to places in the Sun Belt. That kind is not coming back.” US Census Bureau data shows that the largest counties – those with populations of 1 million or more – had their numbers decline much more quickly in the two-year period after the pandemic than before. They shed 1.724 million people. The Washington DC area, New York City, Boston, the cities sprinkled across the southern shores of the Great Lakes, Miami, Seattle and the major metropolitan areas along coastal California all experienced net out-migration in 2022. Counties with fewer than 30,000 people enjoyed an unexpected gain, while those with 30,000-70,000 people experienced a marked acceleration of growth. For a while, so did the mid-sized counties with 70,000-1 million people, but in the second year of the pandemic, the growth rate in these counties fell back to the pre-Covid pace. So, where did all the people leaving these big counties go? Largely, they headed south. Secondary cities surrounding Phoenix, the Dallas-Fort Worth area, Houston and Austin – but not the urban cores themselves – showed notable growth, while further east, net in-migration gains were seen in Florida, the Carolinas and the Atlanta area. Setting aside university towns like Santa Cruz, CA, and Medford, MA, which lost much of their populations in 2020 and 2021, and regained them in 2022 as classes resumed, small cities in Texas and Florida were some of the big beneficiaries of Covid-related migration changes, and their numbers increased by large percentages. Largely ‘tertiary’ rather than ‘secondary’ cities, these locations present some of the biggest opportunities for retailers today. But while they are not new to specialists like Aldi, drug stores and dollar-store chains, for many retailers operating in major markets, they require a lot of adaptation. The population density is lower there, and in a lot of cases, so is household income. However, residents in these cities are often more apt to shop in-store than online and may have unexpectedly high discretionary spending capacity because of lower housing costs. They also like to eat out. Florida and Texas on the rise In terms of absolute numbers, it is better to look at in-migration and population growth on a county level. The biggest increases in head count were seen in counties just outside of major cities in the South, particularly in Texas, Arizona and peninsular Florida. The secondary and tertiary cities within these counties, many of which have been growing steadily for some years, received an extra shot in the arm from pandemic-driven migration. Maricopa County, AZ, which encompasses most of the Phoenix metropolitan area, tops the list. But it wasn’t the city itself that gained so many new residents; rather, the satellite cities on the outskirts of Phoenix, particularly Sun City, Goodyear, Buckeye and Queen Creek, spilling over into the San Tan Valley in Pinal County to the southeast. In Texas, Collin and Denton Counties to the north of Dallas-Fort Worth experienced big gains, particularly around the city of Frisco, as did Richmond and parts of Katy in Fort Bend County near Houston. Williamson County, north of Austin, was also a high growth area, around the cities of Georgetown and Leander. In Florida, growth was seen in secondary cities, such as Lakeland in Polk County, between Tampa and Orlando in the central peninsular area, and Cape Coral and Fort Myers in Lee County, home to large retiree populations. In most instances, the urban cores themselves were not major beneficiaries and in some cases they suffered population declines. Data from Esri, a geographic information system company that uses change-of-address applications filed with the US Post Office to identify population shifts, paints the same picture as the US Census Bureau: since the beginning of the pandemic, south Florida, secondary cities in Texas and Arizona, and the Carolinas have all benefited from changing migration patterns within the US. And as more people move to these locations, retail is following. Will the major cities ever recover? But what does this mean for retail in the major cities that lost so many people and suffered so many business closures during the pandemic and post-pandemic period? In these areas, the situation is much less certain, and often there’s an element of government mismanagement involved. The vacant spaces in the major urban cores are grappling with a lack of foot traffic, crime and onerous city regulations that, when taken to the extreme in cities such as San Francisco, can result in things like a ban on chain stores, which tend to attract large volumes of business. Still, even in beleaguered San Francisco, there is hope. Colliers’ Natunewicz says foot traffic is still OK in certain pockets and retail spaces are being acquired at bargain prices. However, the explosion in construction costs and short supply of laborers could become a problem, since retailers and restaurateurs tend to require a hefty amount of renovating and refitting to make spaces suitable for their use. Meanwhile, for remote workers, the heat is on. Companies sitting on vacant office space in pricy downtown districts in the big urban cores are now using sticks more than carrots as their people prove reluctant to return to the bad old days of commuting. Hybrid arrangements with near total flexibility are becoming rarer, replaced by mandates to work three or four days in the office, with the option of working one or two days at home. Many employment contracts now stipulate that employees have to livewithin commuting distance. But where office-dependent retail almost seemed like a thing of the past just a year ago, in some cities, a faint pulse of life can be detected again. Whether or not it will ever be the same as it was in 2019 is muchless certain. This story first appeared in the September 2023 issue of Inside Retail US magazine.