CoStar Insight: Southern, Western Cities Benefit From Population Growth
Amid the ever-flowing news about the coronavirus pandemic, the U.S Census Bureau just released its 2019 population growth estimates by metropolitan statistical area. Population growth is an important metric to track as it is inextricably tied to demand for commercial real estate across all asset types.
On a percentage basis, the top 13 cities for population growth were in the nation's Sun Belt. This region stretches from the desert states in the west, through Texas and the Southeast up to North Carolina.
Sun Belt cities typically boast affordability, and most have ranked as some of the top job-growth markets in the country in recent years. And while the summer heat can be unbearable at times in certain parts of the region, milder winters continue to serve as a magnet for Midwestern and Northeastern residents looking for reprieve from polar vortexes.
The fastest growing metropolitan area in the country last year was Austin. The state capital bordering Texas' hill country region retained its top spot, where the rapid-growth market has reigned throughout the decade. The Austin market rose from the 35th largest at the outset of the decade to the country's 29th largest metropolitan statistical area in 2019. It benefits from its booming technology sector and relative affordability compared to other tech-heavy coastal markets, as well as its unique culture: Keep Austin Weird is alive and well in the “Live Music Capital of the World.”
Another tech hub, Raleigh, came in second for population growth last year, driven by migration from primarily the Northeast. Raleigh also benefits from the presence of major universities in the Research Triangle, including the University of North Carolina, North Carolina State and Duke University.
Phoenix and Las Vegas draw more residents from ever-expensive California cities as well as a large share of immigrants from Latin America. The Phoenix jobs market was on solid footing before the coronvirus outbreak. Las Vegas in particular may struggle through 2020 given the market’s exposure to the leisure and hospitality industry.
Rounding out the top five is Jacksonville. This may surprise some, but the city’s evolution as a logistics hub due to its growing port, combined with its relative affordability in relation to nearby metros such as Atlanta and Orlando, continue to attract new residents.
But the top markets for percentage growth only gives a limited picture of the country’s population growth and migration trends. The "Big Four" markets of Dallas-Fort Worth, Phoenix, Houston and Atlanta have led population growth totals and in-migration statistics for decades, with Dallas and Houston each adding close to 1 million new residents since 2010.
On the flip side, New York, Los Angeles and Chicago have all seen significant population losses over the past year. Those three markets shed residents in 2019 as renters and buyers flocked to more affordable locales. But perhaps paradoxically, those markets continued to add jobs last year, as labor force participation rose and unemployment rates shrank to near record lows before the coronavirus outbreak.
Northern California's Bay area locales such as San Jose and San Francisco have seen stagnant or slightly negative population growth, while at the same time ranking as some of the best job growth areas in the country.
The phenomenon here can be explained as lower-paid workers migrating away from the dense, urban areas of these typically expensive markets, either becoming “super-commuters” from a nearby area, or leaving the region altogether. Those low- to middle-income workers continue to be replaced by higher-paid workers, primarily in the technology sector.
CoStar Market Analytics will next look into how migration-dependent markets fared during the last recession, which may provide some insight as to how fast those markets may, or may not, bounce back once the coronavirus pandemic abates.