New Yorkers and Londoners are fleeing to the suburbs, and that’s spurring a rally in these stocks

Real-estate companies are seeing clear evidence of New Yorkers and Londoners ditching city centers for suburbs as the pandemic changes the way people live and work.

IWG Plc, which operates Regus-branded serviced offices in cities around the world, has seen a “a strong pick-up in demand” for suburban space versus major cities, especially in places reliant on commuting. While deals for its downtown New York offices have collapsed by 30% since the virus outbreak earlier this year, activity in southern Connecticut has surged more than 40%, according to a statement Tuesday.

Across the pond, U.K. housebuilder Crest Nicholson Holdings Plc’s expected slump in full-year profit may not be as bad as previously flagged, partly thanks to developments in southern England outside of London, it said in a quarterly update. A “structural change to the balance of office and home working” featured strongly in customers’ buying decisions, it said.

Shares in IWG climbed as much as 11% in Tuesday morning trading in London, while Crest Nicholson shares jumped as much as 22.5%, the most on record.

The pandemic has turned the world’s financial capitals into ghost towns as nervous workers avoid mass commuting. While cities across Europe showed signs of recovery in the summer, a resurgent wave of the virus has prompted a series of new lockdowns in the region. New York is also tightening restrictions amid rising infections nationwide.

Both big and small companies are picking up on the suburban trend, IWG said. During the pandemic, sales of small offices accommodating one to two people have jumped 19% amid growing demand for working closer to home. The firm is also seeing strong demand for products supporting home and remote working, with September being its best-ever month for such sales.

Still, the shifts are a silver lining in a challenging year. IWG said revenue fell more than 10% in the third quarter compared to a year earlier, while Crest Nicholson’s full-year profit will be significantly down on last year.

“This shows the current trend of buyers wanting more space — inside and outside of the house,” London-based analyst Iwona Hovenko of Bloomberg Intelligence said following the Crest Nicholson report. “But it will be interesting if the trend lasts once the pandemic passes. I am a strong believer in London long-term.”

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