Will the Exurban Metropolis Be An Economic Powerhouse?

Exurban areas are adding people in the wake of the pandemic. But they’re still not growing their economies as fast as urban cores.

Ever since the pandemic, there’s been a lot of talk about what the suburban pundit Joel Kotkin calls “Exurbia Rising” – the idea that as the population disperses because of more remote work, central cities are in decline, suburbs are holding steady, and exurban locations are the wave of the future.

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There’s no question that exurban areas are adding population, while central city population peaked in around 2016. Just take a look at the map of the Midwest by John Johnson reproduced below. It’s quite clear that people are leaving Chicago, Detroit, and Minneapolis-St. Paul to resettle in exurban locations – northern Wisconsin, northern Michigan, and central Indiana in particular.

A data center in Loudoun County, Virginia

And something is emerging out in the exurbs, which I dubbed in a previous Future Of Where newsletter as “The Exurban Metropolis”. Exurbs work a lot like suburbs: They have houses, schools, parks, stores, and local businesses, and folks commute to work closer in. They just generally drive farther to do all this, or at least that’s the theory.

But are we just seeing the creation of extremely low-density suburbs or is something else going on? As remote work has become more common, Kotkin and others have argued that economic activity will also become more fragmented and traditional job centers will weaken.Central cities and inner suburbs will lose their stranglehold on the economy as jobs follow people.

John Johnson’s map depicting population dispersion in the Midwest during COVID.

This is certainly what the Trump administration wants – and may try to bring about with an effort to decentralize the federal government out of D.C. and other major cities to smaller locations. And to some extent it may occur naturally as the population spreads outward.

Jobs Are Sticky, Even After The Pandemic

But even in the era of remote work, jobs are sticky geographically. Job centers are so expensive to create that it’s unusual for a new one to pop up or an old one to go away. Most people go to a job site at least part of the time and there is increasingly pressure to bring office workers back to the office more often. (Service and blue-collar workers, of course, have no choice but to work at job sites.)

So I’m not convinced that the Exurban Metropolis will include anything except local business activity anytime soon. To put this question to the test, I looked at three pairs of central and what you might call exurban counties. Because county boundaries are all over the place in the United States, this comparison isn’t perfect. But the three pairs are:

— San Francisco (both a city and a county) and San Joaquin County, where Stockton is located, which is about 60 miles away and has almost the same population.

— The “central city,” so to speak, of DC and Arlington, Virginia, combined, and Loudoun County, Virginia, which is located out past Dulles Airport, about 40 miles from the White House.

— Dallas County in Texas (which includes many other cities besides Dallas) and Collin County to the north, which is one of the fastest-growing counties in the nation. I admit that of the three outer counties, Collin is the least “exurban”. it includes inner suburbs such as Plano and Frisco, but it also includes fast-growing exurbs like Celina, which is more than 40 miles from Dallas City Hall.

The results are pretty clear: In all three cases, the exurban county is adding population faster than the central county (and in San Francisco, the central county has lost population). But in all three cases, central county gross domestic product (CDP) is still growing fast, as the chart below shows. The chart depicts increase in per-capita GDP in the three pairs.

The exception is Loudoun County. Take a look at the second chart here, which depicts the change in per-capita GDP from 2020 to 2023 for the three pairs. On a percentage basis, per-capita GDP is growing faster in Loudoun than in DC/Arlington. (By comparison, San Francisco, which is losing population, is still totally killing the exurbs in GDP growth.)

The reason, of course, is that Loudoun is maybe the world’s largest concentration of data centers and the county – like other counties in Virginia – has been aggressive in pursuing them, with the help of state sales-tax exemptions. Exurban locations make sense for data centers: They require a lot of land and electricity, which exurbs are likely to have, but they need to be pretty close to intense energy users, such as, for example, the Pentagon and the rest of the federal government. They’re an economic sector tailor-made for the exurbs.

Once Again, There’s No Economic Development Panacea

But there’s an economic development lesson here, which is there may be less to data centers than meets the eye. Data centers take a lot of land and a lot of electricity but they don’t product many jobs (usually around 50 per data center) and the jobs they do produce don’t pay that much (often around $55,000 to $70,000 per year. The Wall Street Journal has good account of this here.

Indeed, even in Virginia, the Legislature is considering cutting back on incentives for data centers. On my trip to Phoenix last week (more detail about that in my post last Thursday), I heard discontent over and over again about the data centers that have concentrated in the area – all from folks deeply enmeshed in the region’s economic development effort.

In other words, to quote almost every economic development story I ever wrote for Governing, data centers by themselves are not an economic panacea. They might bring GDP but not a whole lot else. Jobs and economic activity remain concentrated in core counties – not always in the central city but often in inner suburbs. And although some workers will work at home some of the time, the Exurban Metropolis will not be an economic powerhouse anytime soon.