Migration South and Westward Is Slow But Steady in 2024

The southern and westward migration patterns that took hold across the U.S. during the pandemic are starting to slow down – but anyone searching for reversals would be disappointed.

This was one of the key points touched on during a June 5 virtual custom event, “Navigating Retail Real Estate: Q1 2024 Insights,” featuring host Ben Witten, Head of Real Estate at Placer.ai, in conversation with David Bitner, Executive Managing Director and Global Head of Research at Newmark (NMRK). The event was hosted by Commercial Observer Partner Insights, and presented by Placer.ai.

Witten showed a slide spelling out how during the three years on from the beginning of Covid, certain states, like Florida, South Carolina, and Montana, gained as much as four percent of their population in new residents.

But over the past year, these gains have slowed considerably, with the most desirable states, such as both Carolinas, Tennessee, and Idaho, still adding on less than one percent to their respective populations.

Bitner, after noting that migration toward the Sunbelt has been growing for decades – since “air conditioning became a thing” – said that the current slowdown shouldn’t be misconstrued as a complete halt or even a major restructuring.

“It’s not like people are suddenly fleeing back into California,” said Bitner. “You still see these trends toward the Sunbelt and the mountain west states, just at a slower pace.”

Witten added that the reversal of recent fortune only applies to certain municipalities, while other, select cities are still finding a strong influx of new residents.

“Some markets, whether Boise, Vegas, or Salt Lake, continue to attract a disproportionate share of net migration,” said Witten. “So the elevated and continued search for affordability still continues to be a theme we’re seeing.”

Delving deeper, Witten discussed why the Carolinas and Nashville were two areas seeing real sustained growth.

“With biotech and the research triangle, the emerging tech scene in the Carolinas continues to boom,” said Witten. “In Nashville, the Oracle announcement — the move of their headquarters from Austin — brings 8,500 jobs to Nashville. That’s not an insignificant move.”

Bitner pointed out that in many of these cases, moderate climates and desirable lifestyles are playing a significant factor in the continued migration.

As an example, the CSA with the largest percentage of in-migration from February 2023 to February 2024 was Boulder, CO, with 3.1% net migration.

Bitner sees this as a perfect example of the pull of lifestyle factors.

“Certainly a part of why Boulder’s at the top of that list right now is because it has fantastic skiing and tons of other outdoor activities,” said Bitner. “That’s also what’s given rise to the Provo-Orem area in Utah: that’s Silicon Slopes. You’ve had a lot of tech workers working remotely, moving out to have access to Park City and Deer Valley.”

Turning to the Texas market, while the state overall is seeing tremendous growth, Bitner and Witten noted that suburban bedroom communities are seeing greater advancement than big cities.

“In all of these markets, from Dallas to Houston to San Antonio to Austin, you see significant growth on a percentage basis out in these peripheral areas,” said Witten. “It’s the suburbs, but it’s also smaller towns that attract this inbound migration.”

Bitner said that the growth in these outlying areas can be seen in both home price data and real-time migration data, enhanced in part by the mass availability of land.

“The sprawling pattern is something that’s very common where you have the ability to develop, because Americans like more space,” said Bitner. “This is where you can get more space.”

Bitner also believes that Austin and San Antonio are just one connecting highway away from becoming the area’s next integrated mega-region, which he believes we’ll see over the next decade or two. This will ultimately benefit not just multifamily, but the office sector, as alternate Central Business Districts develop to serve the new sprawl.

Turning to office, Witten showed a chart illustrating that office visits nationwide are still around 32% lower than in April 2019. And while office attendance has increased considerably since 2021, current numbers indicate a more flattening curve.

“I generally guide towards the assumption that we’re more or less in the new behavioral norm,” Bitner said. “The graph of office visits is more or less flat since mid-2023 – we saw a nadir heading into December and a reacceleration after that.”

Bitner also notes that any current analysis of office trends needs to account for many different factors.

“There are huge differences between Mondays and Wednesdays. There are big gaps between certain kinds of tech companies and between financial services companies, or between front office and back office,” said Bitner. “Most of the changes will be deeply shaped by what kinds of industries are clustered in a given market, and what kinds of behavioral norms have developed in a localized geography.”

They then showed a chart indicating how certain major cities are recovering in the sector. While some, like San Francisco, Los Angeles, and Chicago, are showing rates of office visitation below the national average, which is 32.2% fewer office visits than in 2019, New York is showing relatively robust activity, with office visits down just 16.9% since then. Other major markets on the growth side of the equation include Miami, Washington D.C., Dallas, and Atlanta.

Shifting to retail, Witten showed a chart indicating that on a year-over-year trajectory, retail visitation overall is showing strong performance nationwide.

Still, the details matter.

“Looking at some of the census sales data, retail and food categories are up around 3.5% year-over-year overall,” said Witten. “But on the flip side, there are a few categories that have definitely faced some headwinds. Furniture and homes are down 9%, and building material and supplies are down 2.5%, closely correlated to new home purchases, I would think.”

Given that health and personal care is up 2.9% and food services and drinking are up 6%, the pair see the numbers as indicative of some of the more anomalous findings in today’s unpredictable commercial real estate market.

“If your standard 30-year mortgage is 7% or higher, a lot fewer people are going to buy a house,” said Bitner. “On the other side, the job openings rate has returned to where it was pre-pandemic. I think we’re going to continue to see relatively robust consumer spending, and that will obviously benefit retail.”