One thing is clear in the post-pandemic market, and that is that confusion still reigns. Some experts contend that people who left cities during the pandemic will return and that offices will fill up again. Others predict that people will return to cities but not to offices. Still others believe that the suburbs, exurbs, and rural areas will continue to attract professionals who once resided in cities.
Nevertheless, statistics suggest that at least for now, the standard hot spots are losing out to alternatives. According to data compiled by Rent., the top metro destinations in the U.S. for inbound migration during the third quarter of 2022 were 1) Biloxi-Gulfport, Miss., 2) Huntsville-Decatur, Ala., 3) Madison, Wis., 4) Waco-Temple-Bryan, Tx., and 5) Springfield, Mo.
When it came to outbound migration, traditional magnets like Chicago, Atlanta, and New York were among the top five (at 1, 3, and 4, respectively), along with Traverse City-Cadillac, Mich. (2), and Charlotte, N.C. (5). It’s not just renters either: Recent data from Redfin showed that the top metro areas for outbound migration by buyers during September, October, and November of 2022 were San Francisco, Los Angeles, New York, Washington, D.C., and Chicago.
Watch for new data, though, because more relocations are in store: A recent survey by CBRE revealed that one third of global respondents plan to move within the next two years.
How can brokers adjust to a market that is still in flux? One obvious answer is to keep abreast of trends. Insights are not difficult to find: Rent. and U-Haul publish data on migration, while Kastle publishes a weekly Back to Work Barometer and VTS publishes a monthly Office Demand Index. A simple Google search yields many additional sources of information.
"mass relocations can generate new opportunities for brokers based in popular inbound destinations."
Tripp Guin, SIOR, principal and broker in charge at TRIPP Commercial in Charlotte, N.C., pays close attention to who is moving, where they are moving, and which employers and industries are following their lead. Then he strives to build relationships with people in markets where the deals might be outbound. His strategy has already met with success: A relationship with a broker in California led the broker to recommend Guin for a site-selection assignment in North Carolina. To Guin, this experience underscores his belief that mass relocations can generate new opportunities for brokers based in popular inbound destinations.
Bryce Custer, SIOR, broker at NAI Spring Commercial Realty in North Canton, Ohio, agrees. He has helped numerous companies establish a presence in West Virginia, which has been attracting an influx of remote workers who want to take advantage of the live/work/play lifestyle. Many of their decisions were aided by a state incentive called Ascend West Virginia, which gives participants $12,000 to move to the state. Custer believes that more employers will follow these relocation footsteps, and when they do, he hopes the employers will get in touch with him. As he points out, “It’s important for them to enlist the help of a broker to make sure that what they need is available to them, such as prospective employees and educational institutions where the employees can be trained.”
Incentives also exist for employers, and Custer believes that it’s his job to help his clients access them. “All brokers have to be knowledgeable about the local, regional, and state incentives available to companies,” he says. “We need to direct them to the appropriate people for grants or low-interest loans. We need to direct them to the local community college. We have to be the quarterback of the team that is ready to help a company as soon as its initial phone call comes in.”
Custer also sees his role as helping communities make remote work easier for professionals who relocate. “It’s imperative for certain communities to provide an adequate infrastructure, such as high-speed internet,” he states. “That’s one of the things we talk to community leaders about: how to make sure that remote workers have everything they need to do their job effectively.”
The big question for brokers adapting to what we might term “The Great Relocation” is whether it will evolve into “The Great Relocation in Reverse.” Multifamily Dive covered the MSCI Global Real Assets Conference in November, during which panelists mentioned the social appeal of urban environments and rising gas prices as factors prompting returns to cities. A panelist from AvalonBay also noted the narrowing gap between rents in primary and secondary markets, which is prompting renters to contemplate reverse migration.
Meanwhile, employers are becoming less lenient with employees who wish to work remotely. A Capterra survey published in November found that 74% of managers will factor office attendance into employee performance reviews. Twenty seven percent have already fired an employee because of poor office attendance. This comes as no surprise to Guin, who questions the longevity of hybrid and remote work arrangements, especially when the market swings back in favor of employers. He predicts: “There will definitely be a new way of doing things, but it will be a lot closer to the old way of doing things than people assume.”
Guin looks back at 9/11 as a precedent for the post-COVID-19 landscape. As he explains, “In the immediate aftermath, many people said that no one would ever work in downtown New York again and that no one would fly again. Six or so years later, downtown New York was a hotbed of activity, and people were flying everywhere; they just had to spend more time in security lines.”
Custer has a different perspective. He observes that the younger generation will inherit a great deal of wealth from their parents, which will allow them “to play wherever they want and not be tied to a desk.” In his opinion, “It’s going to be hard to force employees to go back to the office five days a week.”
In conclusion, the jury is still out as to whether the traditional hot spots like New York, Chicago, and San Francisco will reheat and entice former residents and their employers to return. But by tracking the data, brokers can at least make educated guesses and know that they’re getting warm.
Bryce Custer, SIOR
Tripp Guin, SIOR