2014-05-12

Co.Exist

Why Mercedes Is Planning For A Future Of Suburbs, Not Cities

The company says the U.S. suburbs aren't dead after all. But, for a company that wants to sell cars, is it a case of seeing what you want to believe?

Around the world, mega-cities are shooting up in the skies seemingly overnight, and according to some predictions, the planet's urban population will double in the next 40 years. But while urbanists are cheering for a future full of cities, Mercedes Benz is planning for a future of suburbs, at least in the U.S.

"You’ll read in the media that the car is dead, Gen Y isn’t interested [in the car]. Part of our role in company is to take conventional wisdom and dispute it," says Eric Larsen, the director of Mercedes-Benz's society and technology research group, who is based at the company's R&D facility in Silicon Valley. "The U.S. is a unique market, with the rise of mega-suburbs, not mega-cities. It's good news for our company. The car is going to be the dominant form of transportation in the U.S. for the long term."

Larsen points out that though mega-cities are transforming countries like Brazil, India, and China, the U.S. has an incredibly low density of urbanized areas. Between 2000 and 2010, almost all the growth in major metro areas was in the suburbs, according to census data.

"The myth is that people are tired of suburbs and moving into cities. That is simply not true. It's not a very interesting story to say, 'Well, another 100 couples moved to the exurbs and had three kids each,'" he says.

Of course, it's good news for Mercedes if people really are sticking to the suburbs. As Larsen is quick to point out, the suburbs are built for cars.

But the demographics have started to shift in recent years. While many large cities grew slowly (and in some cases, lost residents) from 2000 to 2010, cities with a population of over half a million people grew faster in 2010 to 2012 than they did on average compared to the previous 10 years, according to census data. And for 16 of the 20 biggest cities in the country, growth sped up from 2011 to 2012 compared to 2010 to 2011. The Brookings Institute elaborates:

The faster growth of large cities might relate to the continued slowdown in suburban growth, held back by a still-lagging housing market. In 2010-11, big cities in the nation’s largest metropolitan areas grew faster than their suburbs for the first time since the 1920s, a trend that prevailed again in 2011-12 (Figure 2). Among the 51 metropolitan areas with more than one million residents, 24 saw their cities grow faster than their suburbs from 2011 to 2012 (Table 2, PDF). That was true of just 8 metro areas from 2000 to 2010.

Of course, the suburbs of Sunbelt metropolitan areas like Austin, Houston, and Orlando continue to grow very fast. Yet their big cities are also growing rapidly, faster relative to their suburbs than in the 2000s.

Also from Brookings, a chart detailing the city/suburb growth swap:

But George Masnick, a fellow at the Joint Center for Housing Studies at Harvard University, explains in a blog post that the numbers are more complex than Brookings lets on (read his post for more detail on growth rates vs. growth numbers). He concludes:

During the next decade, some of the factors that have depressed housing turnover in the suburbs in recent years should run their course. New housing construction will be needed to accommodate adult population growth from aging echo boomers, and possibly the next wave of immigrants. This should largely take place outside of primary cities—where land is more readily available.

This is all to say that despite the dwindling desires of young city-dwellers to eventually move out to and have kids in the suburbs, Mercedes may be right—it doesn't need to worry about its suburban market for the time-being in the U.S.

The company points out that suburbia does have its advantages for sustainable vehicle development (namely, the fact that someone in the suburbs with enough space for a garage can charge their electric vehicle in that garage). But since suburbia is now home to the fastest-growing and biggest population of poor people in the U.S., we have to also hope that suburban public transportation infrastructure grows alongside vehicle purchases.

[Image: Planned community via Shutterstock]

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4 Comments

  • At some point the Y Generation is going to get "priced out" of their Urban Lifestyle and will need to move to where it is more affordable. That means "further away from the urban center", the suburbs. They'll need a car. However, I doubt they'll be buying expensive German vehicles.

  • Thomas Goodwin

    "Larsen points out that though mega-cities are transforming countries like Brazil, India, and China"

    Errr, you do realize this is pretty much where the bulk of the population is?

    So what you mean is, Mercedes think the USA, based on the last 10 years, may have a few more people moving into suburbs.

  • Mercedes (and everyone else) should be less concerned about political boundaries and more concerned with the TYPE of development that is occurring. Toll Brothers, bastions of single family home construction, have begun building large, mixed-use developments in both cities and suburbs in the last 5 years. Many of Washington D.C.'s suburbs have rapidly urbanized around metro stops. These are not isolated trends. Yes, some of today's single urban millennials will eventually get married and buy a car for their family. But some won't while others will keep to a single car family while living in some of these much more urban suburbs. There are few bigger business mistakes than assuming everything will be exactly as it has been in recent memory.