Remote work has dispersed economic activity away from city centers, according to researchers who dubbed the phenomenon, the "Donut Effect."

“How working from home reshapes cities,” published last fall in the Proceedings of the National Academy of Sciences (PNAS), a peer reviewed journal of the National Academy of Sciences (NAS), estimated that about three-fifths of households that left large cities moved to the suburbs of the same city thanks to hybrid work schedules. Of the remaining 42 percent who relocated to other areas entirely, 29 percent went to smaller cities, 9 percent went to other large cities, and 4 percent to rural areas.

The “Donut Effect” is limited to large cities and is “larger and more persistent” in cities with high levels of remote work. Authors suggest that the Donut Effect may have varying impacts on cities, such as:

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• -- Shifting the tax base from cities to surrounding areas, which could strain large cities’ public finances;
• -- A decline in public transportation usage, which may raise concerns about the solvency of mass transit systems;
• -- Large reductions in office valuations due to a drop in demand that could strain real estate firms and financing banks;
• -- Rezoning office space into mixed use to attract residents back to city centers which could cities more livable;
• -- Declining commute times and peak-hour traffic; and,
• -- Employees moving to less dense suburbs with larger homes and suburban amenities.

“Altogether, the net welfare effects of the Donut Effect are still ambiguous and will depend on how society continues to respond.”