The demand for the suburban lifestyle had been driven mainly by safety and schools, he said. "If you wanted to see the end of suburbia, all you'd need to do is make the school systems in the cities triple-A and why would anybody live in the suburbs," Zell said.
One of the byproducts of people moving to cities is soaring demand for apartments. "We are seeing 96 percent occupancy," said Zell—who's chairman of the real estate investment trust Equity Residential, one of the largest apartment groups in the country. Of the 18,000 units the REIT manages in New York City, Zell estimated 45 percent are occupied by just one person.
"It's probably going to happen here in New York first," he said. "You're going to see 300-square-foot apartments, directly related to that one person wanting to live alone—and saying, 'I'll give up space for privacy.'"
—By CNBC's Matthew J. Belvedere. Follow him on Twitter