The Great Re-Shuffle: How Shifting Migration Patterns Are Rewriting the Rules for Commercial Real Estate
For decades, the American dream involved chasing opportunity westward, or more recently, southward. But a fundamental shift is underway. The drivers behind where Americans choose to live are evolving, moving away from purely economic factors towards personal priorities like family proximity and affordability. This isn’t just a lifestyle change; it’s a tectonic shift with profound implications for commercial real estate investors.
Beyond Sunbelt Fever: A More Nuanced Migration Story
The pandemic-era rush to states like Florida and Texas has cooled. While these states remain popular, the influx has become more balanced. United Van Lines’ latest migration report reveals Oregon as the top moving destination for the first time ever, signaling a desire for a different pace of life. Six of the top ten inbound states are now located in the South Atlantic region – West Virginia, South Carolina, North Carolina, Arkansas, Alabama, and Delaware – indicating a broader appeal beyond the traditional Sunbelt hotspots.
This isn’t simply about escaping high costs; it’s about finding a better quality of life. Eily Cummings, VP of Corporate Communications at United Van Lines, notes the increasing complexity of migration motivations and divergent patterns across age groups. Younger millennials and Gen Z are gravitating towards more affordable alternatives like New Jersey, while retirees are driving outbound migration, making New Jersey the top state for people leaving.
What This Means for Commercial Real Estate Investors
Ryan Severino, Chief Economist at BGO, argues that the changing rationale behind migration necessitates a recalibration of investment strategies. If people are moving for affordability, the commercial real estate landscape needs to adapt. The focus should shift towards affordable housing, modest office parks, and middle-to-lower-income retail spaces.
Even industrial real estate needs to adjust. Smaller workforce housing developments require nearby self-storage facilities, reflecting the needs of a more budget-conscious population. Investors need to be “smarter and pick their spots more carefully,” Severino emphasizes, moving away from the assumption that past migration patterns will automatically continue.
The Multifamily Miscalculation and the Rise of Buyer’s Remorse
The initial surge in migration to Southern states led to a wave of multifamily development. Developers, anticipating years of robust rent growth, aggressively expanded supply. However, the market has corrected. Rents are now declining as oversupply enters the market, and some migrants are already reconsidering their move.
Manus Clancy, Head of Data Strategy at Lightbox, points to Arizona, Nevada, and Florida as examples where the “better quality of life” promise didn’t always deliver. “They built a bunch of housing…and then a lot of those people didn’t stick around,” he says. The record-breaking new inventory in 2024 – the highest in 50 years – contributed to this buyer’s remorse.
Retail’s New Reality: Discount and Necessity
The shift in migration patterns also impacts retail. The days of speculative strip mall development are over. Investors are becoming more selective, focusing on proven concepts and essential services. Clancy predicts increased demand for discount grocers and retailers like Walmart, catering to the needs of a more price-sensitive consumer base.
High-end retail, however, still has a place, particularly for established players like Simon Property Group. But even they are exercising caution and prioritizing strategic locations.
The Midwest Makes a Comeback?
Interestingly, data suggests a renewed interest in smaller, more affordable Midwestern markets, particularly among younger Americans. While the South will continue to attract retirees, the overall pace of migration is slowing, making the “layup” investment opportunities of the past less certain.
Frequently Asked Questions (FAQ)
Q: Is the Sunbelt still a good investment?
Yes, but it’s no longer a guaranteed win. Investors need to be more selective and focus on markets with sustainable demand and limited oversupply.
Q: What types of commercial real estate are most promising right now?
Affordable housing, modest office parks, and retail spaces catering to essential needs (discount grocers, etc.) are currently strong contenders.
Q: How can I stay informed about migration trends?
Follow reports from United Van Lines, the U.S. Census Bureau, and commercial real estate data providers like Lightbox. Subscribe to industry newsletters like CNBC’s Property Play.
Q: What is the impact of slowing population growth on commercial real estate?
Slower growth means less demand for all types of commercial real estate, requiring investors to be more strategic and selective.
The American landscape is undergoing a significant re-shuffle. Successful commercial real estate investors will be those who recognize these evolving dynamics and adapt their strategies accordingly. The era of easy gains fueled by mass migration is over; a more nuanced, data-driven approach is now essential.
Want to learn more about navigating the changing commercial real estate landscape? Subscribe to CNBC’s Property Play newsletter for weekly insights and expert analysis.
