"For many people, commuting is the worst part of the day and policies that can make commuting shorter and more convenient would be a straightforward way to reduce minor but widespread suffering."
- Daniel Kahneman, Princeton emeritus professor and Nobel laureate
"It must be awfully frustrating to get a small raise at work and then have it all eaten by a higher cost of commuting."
- Ben Bernanke, former Federal Reserve chairman
Raise your hand if your commute time is shorter now than 10 years ago. While we can’t speak for all CoStar clients, we’re guessing it’s not a lot of you. There’s a bit of a commute time problem across the U.S. right now. As one glaring example, a recent Wall Street Journal video on the value of tech industry clustering noted how major cities seem to be hitting capacity, with congestion and affordability a concern in major tech hubs.
A longer commute is not just annoying, it actually leads to a loss in general life satisfaction. And it is also a serious headwind to productivity, which is something economists have cited as a major factor holding back U.S. economic growth in recent decades.
The chart below shows the nationwide distribution of commute times in 2010 (blue bars) and 2018 (red bars). As you can see, there has been a drop in those who can get to work in under 25 minutes, and an increase in those who spend more time traveling, especially those whose commutes last 45 minutes to an hour and a half. In raw terms, about 30 million Americans now commute 45 minutes or more to work each way.
What’s driving this population shift toward longer commutes? It certainly runs counter to the popular perception that everyone, particularly the oft-cited millennials, want to live downtown. Let’s dig in.
Populations grow. Well, most of them, but especially during a prolonged economic recovery like the one we've seen since 2010. How a city distributes its growing population gives insight into its capacity. One good tell for a city struggling to handle growth well is an increase in the number of people who travel 45 minutes or more, who we’ll call super commuters.
To back-test this idea, we took a look at 2010’s share of super commuters for the 25 largest metropolitan statistical areas in the U.S., and subsequent population growth to 2018.
It’s not perfectly predictive, but there is a clear negative correlation, suggesting that cities with an already high share of super commuters couldn’t grow as fast. Most of the cities you see on the right side of the chart above are the established, already dense metros of the Northeast and Midwest. We then conducted the analysis another way: How does population growth influence commute times? The chart below looks at population growth in those same cities from 2010-2018 along with the percent increase in super commuters over that same period. We find this a more interesting view, offering a glimpse of who has absorbed growth well.
Here we see a positive correlation, as you’d expect: Rapidly growing cities typically struggle to keep up with the infrastructure investment necessary to ease commuting stress.
Our outliers in each test are similar: Riverside, Atlanta, Phoenix and Denver have all seen rapid growth while efficiently handling that growth. On the other hand, St. Louis, Philadelphia and Baltimore have all seen very little growth, but still a larger increase in super commuters.
Let’s have some fun and compare some cities.
Below we see how Philadelphia has seen an outright decline in 0-14 minute commuters, while Minnesota has found space for most of its growth fitting in the less-than-35 minute commute buckets.
CoStar’s director of market analytics in Philadelphia, Adrian Ponsen, points to a variety of reasons for the longer travel times in his town, including the rise in commuters from the New York City area, traffic bottlenecks, and companies choosing to locate downtown instead of favoring suburban offices.
Although Minneapolis workers appear to have it far better, Michael Roessle, CoStar’s director of office analytics in Minneapolis, doubts anyone living in his city or nearby St. Paul would call travel times great. “There's truth to the adage here that the Twin Cities has two seasons: winter and road construction,” Roessle said.
Still, the city's relatively short commutes appears due to its ability to add density downtown, in addition to Minneapolis being a very walkable city. Philadelphia and Minneapolis appear to be two cities at very different stages of maturity.
Among the faster-growing metropolitan areas, San Francisco and Seattle clearly stand out in this analysis…and not for a good reason. San Francisco has seen similar growth to San Diego, Tampa and Houston, but much larger increase in super commuters, while Seattle’s share of super commuters increased rapidly compared to Riverside, Atlanta, Dallas and Phoenix.
San Francisco and Seattle have both experienced major tech industry expansions, but a side effect of that clustering in tight locations is congestion, as mentioned in the WSJ video linked in our introductory paragraph.
We realize that it’s comparing apples and oranges, but it is interesting to compare the two relative extremes of Phoenix and San Francisco. In the chart below you can see how Phoenix has seen its distribution of commute times skew much shorter as its population has grown, while San Francisco has seen a dramatic shift toward longer commutes.
Phoenix has added roughly the same percentage of commuters in the sub-30 minute buckets as San Francisco has added in 45+ minute commuters. There are certainly geographical reasons for these differences as well, such as San Francisco being on a peninsula and Phoenix sprawling out across the desert, but that does impact long-term growth trajectory, unless special policies are enacted to counteract the disadvantages.
Jessica Morin, CoStar’s director of market analytics, notes the city is unique in both being constructed on a grid system and growing outwards instead of vertically. Additionally, the city has been proactive in upgrading its transportation infrastructure.
There are many reasons why somebody would choose to commute more than 45 minutes to work. It could simply be personal preference for more space and more house for your money. It could also be a general lack of available housing near work, or having to contend with decaying or congested transportation. One of your authors is a New Jersey Transit rider and can confirm that the commute is much longer than it was 20 years ago, despite riding in the same trains that NJT used 20 years ago!
However, we’d guess that the main culprit is affordability. When we look at cities like New York and D.C. that have structurally long commutes, they are expensive places to live. When we look at cities like San Francisco that are struggling to handle their growth, and thus creating a lot of super-commuters, they are also very expensive. While Seattle isn’t the most expensive rental markets, it is in the top 20 and its rent growth has vastly outperformed the rest of the country in recent years…it’s getting pricey quickly.
We are already seeing responses from some cities, such as San Francisco building more multifamily next to public transit. As CoStar's Lou Hirsch writes : “Bay Area cities in particular have been moving toward transit-oriented development, after the state last year enacted a new law requiring the Bay Area Rapid Transit system to create transit-oriented development guidelines for all of its owned properties that are adjacent to transit stations, including minimum height and density requirements.”
We plan to spend many future notes analyzing these trends and what they mean for commercial real estate. There are some fairly obvious takeaways. Super-commuting cities need more multifamily downtown or close to public transit, or else suburban office construction. Or better infrastructure. We plan to look at things like multifamily rent growth trends in these markets (downtown vs suburban, transit-adjacent apartments vs more remote, etc) as well as suburban office demand and construction.
We would also love to hear from readers what other kinds of ideas they want to explore around this commuter data set. There are a lot of threads to pull here, and your humble authors aren’t going to think of them all.
The Week Ahead …
Some moderately important economic data is scheduled to be released this week, headlined by the second estimate of fourth quarter gross domestic product and January data on personal incomes, spending and inflation. Core Personal Consumption Expenditure inflation is likely to remained muted, but could see a slight uptick on higher health care prices, as we witnessed in the last core Consumer Price Index print but also via a rise in hospital prices seen in the past week’s Producer Price Index.
Fedspeak will hopefully continue to clarify views around a strengthening of the inflation target, with comments from Vice Chair Richard Clarida, who led the policy review, to be particularly enlightening.
The Democratic presidential primary continues, with Nevada polling and results out Tuesday.
CoStar Economy is produced weekly by Robert Calhoun, managing director and senior economist, and Matt Powers, associate director of CoStar Market Analytics in New York City.