Markets to Target in 2022
In establishing EquityMultiple’s markets to target in 2022, we considered numerous sources, including research from the Urban Land Institute, the U.S. Census Bureau, and the U.S. Bureau of Labor Statistics. Our Real Estate Team also considers proprietary data sets and conversations with partners and brokers across the U.S. Our real estate investment theses are based on several factors; however, cities that made the cut generally had some combination of:
- Low cost of living
- Strong job growth
- High net migration
- Favorable tax laws
- Access to the outdoors
For the purpose of this article, we’d like to highlight select cities from the “smile region,” which per its namesake, stretches across the U.S. in the shape of a smile, down both coasts, and through high-growth Southern real estate markets with strong fundamentals. Read on to learn why we are looking to these markets for potential investment opportunities in 2022.
Phoenix, Arizona MSA
Phoenix has one of the fastest growing local economies and job markets in the country, with a population of 5.05M and an unemployment rate of 3.2%.¹ It is home to many high-tech, IT, renewable energy and bioscience industries.
Multiple demand drivers, including statewide infrastructure investments, affordable housing and significant commercial development have led to both residential and corporate migration. In fact, as of December 2021, the average home price increased 32.5% year-over-year.² Perhaps unsurprisingly, Phoenix landed at #3 on the Urban Land Institute’s top markets for overall real estate prospects (as of their latest report, released in October 2021).
Greater Houston, Texas
We believe Houston is one of the largest and fastest growing U.S. cities for good reason. The Houston metropolitan area (MSA) has a population of about 7.15 million as of 2020. It is now the fourth most populous city in the nation, and the largest in the southern U.S. and Texas. The unemployment rate also fell to 4.8% in December 2021.¹
Houston offers a relatively low cost of living, strong job growth, and no personal income tax. Long recognized for its oil and gas industries, Houston’s economy is surprisingly diverse, drawing talent from the healthcare, aerospace, manufacturing sectors, and more. Twenty-four Fortune 500 companies now call Houston home, ranking third among U.S. metro areas in Fortune 500 headquarters. Per Moody’s Analytics REIS forecast data, asking rents for the Houston metro are anticipated to increase 3.1%, 3.1%, and 3.3% in 2022, 2023 and 2024 respectively.
Miami-Fort-Lauderdale-West Palm Beach, Florida
Miami is famous for its warm weather and beautiful beaches, as well as its art, entertainment, and nightlife. Given its numerous leisure activities, Miami has a thriving tourism industry. In recent years, businesses from major hubs like Silicon Valley and New York have also relocated (or announced plans to move) to the Miami region.
Another potential boon for multifamily real estate investors: in 2020, Miami home prices shot up 27.3%–far above the national average of 18.8%.² On a related note, the asking rent for multifamily apartments is up 17.4% year-over-year, compared to 11.3% nationally.³
The Urban Land Institute ranked Atlanta #8 on their list of top markets for overall real estate prospects. Atlanta boasts numerous job opportunities as the headquarters of companies like The Home Depot, Delta Airlines, Coca-Cola, and UPS. Residents appreciate its mild climate, burgeoning food scene, and nature within city limits. Atlanta also has a world-class airport, holding the record for the busiest airport in the world from 1998-2019, only falling to second place in 2020 due to COVID-19 travel restrictions.
Another positive indicator: Atlanta has experienced a strong population growth rate in recent years. With no signs of slowing, the region is expected to reach 8.6 million by 2050.⁴
The secret is out–Richmond is a small city with a high quality of life. Its affordability, historic charm, and proximity to the outdoors attract new residents. For reference, the Richmond MSA has a population of 1.3M, and a 3.7% unemployment rate.¹ This past year, Richmond’s effective rental rate also increased 12.1%, ending Q4 2021 at $1,274 per unit.⁵
New York Metropolitan Area
Throughout the pandemic, we all heard stories about how the nation’s largest cities like New York were dying, as Millennials moved en masse to suburbs and small towns. While there is some truth to this narrative, the actual migration patterns from last year tell a different story. In fact, many moves were temporary, and 79% of people who did make permanent moves stayed within the New York metro area. And in Manhattan specifically, Q4 office leasing activity increased to levels not seen since before the pandemic, signaling a long-term recovery is already underway.⁶
The Bottom Line
EquityMultiple’s top markets have particularly interesting dynamics. Many of these cities have capitalized on the increasing cost of living in gateway markets like San Francisco and Los Angeles. Among other factors, we expect their relative affordability, strong job growth, favorable tax laws, and opportunities for outdoor recreation will continue to drive high net migration.
That said, we believe real estate investors can find opportunities for compelling investment properties in all sectors and regions of the country as the U.S. economy continues to recover from COVID-19.
¹Sources: U.S. Bureau of Labor Statistics (as of March 18, 2022); U.S. Census Bureau (as of May 5, 2021).
²Source: S&P Dow Jones Indices (as of February 22, 2022).
³Source: GlobeSt (as of January 24, 2022).
⁴Source: Atlanta Regional Commission (as of October 10, 2019).
⁵Source: Colliers (as of February 16, 2022).
⁶Source: Bisnow (as of January 4, 2022).
This document is for informational purposes only and is not an offer or solicitation to purchase or sell securities. Investing involves risks, including the potential for principal loss. There is no guarantee that the strategies and services will be successful or outperform other strategies and services. Certain assumptions may have been made in connection with the analysis presented herein, and changes to the assumptions may have a material impact on the analysis or results.
¹Past performance is no guarantee of future results. The investments discussed herein may be unsuitable for investors depending on their specific investment objectives and financial position. Investors should independently evaluate each investment discussed in the context of their own objectives, risk profile and circumstances.
All opinions expressed herein constitute the author’s judgement as of the date of this article and are subject to change without notice. Statements made are not facts, including statements regarding trends, market conditions and the experience or expertise of author are based on current expectations, estimates, opinions and/or beliefs. Such statements are not facts and involve known and unknown risks, uncertainties and other factors. Past events and trends do not predict or guarantee or indicate future events or results.
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