Many CBDs Still See Pre-Pandemic Consumer Spending

Central business districts are important parts of metropolitan areas. They not only are homes for important areas of office, but of retail and often of residency. But according to a new Bank of America analysis, many in northern and western parts of the U.S. haven’t seen consumer spending return to pre-pandemic levels.

“There appeared to be two major reasons for this. One was the rise of remote work, or working from home (WFH), which started during the pandemic but has persisted since and in turn, displaced consumer spending away from CBDs into areas closer to people’s homes,” the bank wrote. “The second, which impacted northern and western cities in particular, was outward migration trends, accelerated by the pandemic. This movement saw large outflows of people from impacted cities, further drain spending in the CBDs from which they left.”

Relative to four years prior, Seattle, Boston, San Francisco, and New York saw some significant losses of consumer spending. Seattle was down close to 30% while San Francisco was close to -35%, New York was shy of 20%, and Boston is just over 20%. That highlights how bad things can be. And yet there were metros that saw significant improvements. Tampa was up by nearly 40% and Phoenix over 40%. Columbus, Ohio, up nearly 20%, as was Nashville. And Houston, maybe 12% up.

“Interestingly, some cities that lost out in the pandemic may be showing some signs of stabilization,” the bank wrote. “In New York and Seattle, total retail spending per household over a three-month moving average ending July 31is actually up compared to a year ago. Meanwhile, for the big advancers since the pandemic, the recent performance of late is patchier. In a few CBDs, such as Dallas, Austin and Nashville, total retail spending appears to be weaker than a year earlier.”

Migration trends were one of the factors driving both the increases and decreases. Northern and western cities saw a lot of outward migration. Southern cities saw incoming migration, driving up population and, so, spending. “For example, Tampa and Phoenix have seen a rise in spending of around 40%, while the increase is a more modest 6% in Charlotte and 7% in Orlando,” they said.

One factor the study didn’t address was inflation and changes in pricing. If spending was adjusted for inflation, then there would be no affect. However, if the numbers were nominal, inflation would have emphasized spending growth where it occurred or underestimated a fall.