According to a survey conducted earlier this year by home finance agency Fannie Mae, the Millennial generation is following the jobs to smaller cities — so-called secondary cities — where the cost of living is significantly less than “primary cities” such as New York and Los Angeles.
A June 1st Bloomberg Brief focusing on real estate says these 18- to 34-year-olds are finding jobs in industries including education, health care and other service industries, energy and technology. This trend of millennials migrating to secondary cities such as Austin and Raleigh is having a notable impact on rentals and multifamily construction, especially given that most of this generation indicated an interest in eventually owning their own homes as their parents and grandparents did.
Millennials moving away from primary cities
The Bloomberg Brief takes a closer look at five smaller cities (Austin, Dallas, Houston, Seattle and Raleigh-Durham) that have been able to attract an above-average number of millennials. These metropolitan areas range from 23% to 27% of their total population in the 20-34 year old cohort (nationwide millennials represent 23.2%). These areas all boast well-diversified employment bases and have therefore been able to attract and retain strong employers. This creates an attractive environment for young, educated workers who want to earn a comfortable living.
Four of the five cities (all except Houston) enjoy a thriving high-tech sector as a part of their economies. Houston, however, depends more on manufacturing, logistics, health care and energy to power its economy.
All of these metros offer a growing number of high-paying jobs together with a lower than average to average cost of renting an apartment, a “win-win for early career, cash-strapped millennials.”
Improved multifamily fundamentals in second-tier cities
“In recent years, however, we have seen a new trend emerging: Smaller primary metros, including Austin, Dallas, Houston, Seattle and Raleigh-Durham, have experienced a combination of increased demand and new supply of rental apartments. These cities have witnessed improved multifamily fundamentals as a result of shifting demographics, a surge in job growth and positive net migration.”
To back up this trend, the Bloomberg report highlights that here are around 19,000 apartment units under construction in Dallas, most coming online later this year.
In Austin, an estimated 14,200 apartment rental units representing around a 7% boost in available inventory are anticipated to hit the market over the next two years.