People are moving out of big city centers and its changing the freight landscape

Frisco, Texas is a suburb just north of Dallas and one of the fastest growing cities in the US

Frisco, Texas is a suburb just north of Dallas and one of the fastest growing cities in the US

Most people in America believe that urbanization is increasing, but the opposite is true. City centers are losing people as they flock to smaller cities and towns across the US. This reverses a constant that has been true since the dawn on industrialization, where people flocked to major urban centers to take advantage of resources, jobs, education, and entertainment opportunities.

In the past, the lifestyle afforded by only the biggest urban centers were a huge draw, but in a digital environment, the opposite is true. As telecommunications improved and companies like Amazon offered real-time delivery on major shopping products, the draw of big cities changed. After all, living in a city comes with great sacrifices.

The cost of having an urban center address Is very high. Taxes, rent, and housing prices are much greater the closer you are to major commerce centers. Urban infrastructure buildout usually means that taxes will be increased to support such initiatives. In cities such as San Francisco and New York the cost of living has gotten so big that people are finding extreme ways to cope. Some people are taking airplanes for a daily commute from cities like Reno, Las Vegas, and Southern California and finding it to be cheaper than owning or renting a property in San Francisco.

University of Kansas has studied IRS data to examine the trend of people leaving major cities. In a study released in 2009, the University reported that 14% of people in the US relocate to another city each year and tend to leave larger urban cities with populations greater than 5 million for cities with populations less than 1 to 2 million.

More recently, this trend has accelerated. In a recent article, the New York Times quoted William Frey, a demographer at the Brookings Institute that recently studied the concept of deurbanization, “While many, if not most, large cities grew faster than their suburbs between 2000 and 2015, in the last two years the suburbs outgrew cities in two-thirds of America’s large metropolitan areas.”

There also appears to be a high-correlation between crime and deurbanization. According to Frey, cities with high murder rates saw the greatest decreases in populations. Chicago, Baltimore, St. Louis, and Milwaukee all had the highest population drain and also have the highest murder and violent crime rates.

Frey stated, “Fourteen big cities lost population in 2015-16 compared with just five in 2011-12, with Chicago, the nation’s third-largest city, hemorrhaging the most people.”

Cities like Charlotte, Orlando, Tampa, Nashville, Austin and Fort Worth all had large gains. Suburban areas surrounding major metro areas also saw huge increases. Dallas, Atlanta, and Phoenix metro areas all had rapid growth, but a large percent of that took place in the suburbs and not the city center.  Low-density suburban areas saw the highest growth as millennials leave city centers and take advantage of lower cost housing, better suburban schools, and low crime rates.

This trend is expected to increase over the next few decades. With the increasing level of same-day and next-day deliveries, combined with ubiquitous high-speed internet, people are expected to continue to choose suburban and smaller cities to call home.

All of this will have profound impacts on freight networks. The cost of residential deliveries is much more expensive than commercial deliveries, by as much as 60%. This is caused by the lack of freight density in last mile deliveries. It also plays havoc on the network of the logistics networks as the companies manage inconsistent delivery schedules and the lack of urban density.

To accommodate growing demand, logistics companies have been creating smaller fulfilment centers throughout metro areas rather than having a single sorting center. They have also been buying up flash warehouse space to manage volume spikes. One large truckload carrier told FreightWaves that some retailers have been using their trailers as mobile warehouses during peak season to allow them to respond to last minute residential orders.

The big question is whether this shift is good or bad for the truckload sector. According to most analyst and industry insiders, the truckload carriers will benefit from the move towards more fulfilment centers in smaller markets, as the large ecommerce companies will have to locate more inventory throughout their delivery networks to respond to last minute e-commerce demand. After all, consumers have become accustomed to same day or next day deliveries and expect all products to be available at the click of a button. Just because they move out of a big city, doesn't mean they want to give up its many benefits.