Development Pipeline • Section 3 The Hill reported four upstate counties have seen a surge
in real estate demand, while the rest of the New York market declined. In Ulster County, north of New York City, the num- ber of homes under contract was nearly double the 2016 figures. The county saw steady sales in March and April, while the overall New York market fell by almost 30 percent.
Some real estate experts estimate a quarter of a million
New York residents may relocate to upstate counties perma- nently. More than 16,000 New York residents have already relocated to suburban Connecticut, rural New England, and Florida in significant numbers.
Similar trends are also occurring in other large urban ar-
eas. Primary cities such as New York and Chicago have seen net-out migration of 600,000 since 2014 as residents shift into smaller markets.
There has been a sharp uptick in interest in moving to
Montana, with the majority of new inquiries coming from Cal- ifornia. Real estate sales in Montana were 10 percent higher than at the same time in 2019. Rural Colorado, Oregon, Ver- mont, and Maine have seen similar spikes in property sales, according to The Hill.
Even though the city is open again, we likely won’t see
people flock back to New York because a lot of people who had to commute to Manhattan won’t have to return to their offices for the foreseeable future. Apartment rents have dropped dramatically because of the exodus, so lower pric- es will eventually lure people back into New York and other metros.
It’s noteworthy that prior to COVID-19 rippling through
the United States, growth patterns already suggested that Americans are opting for secondary markets such as Austin, Charlotte, Las Vegas, and Nashville, according to a report.
The trend reflects the desire of investors and companies
to establish their primary offices and headquarters in sec- ondary or even tertiary markets. Nashville, for example, has already begun to see the effects of Amazon’s arrival in the city and is bracing for the expected arrival of Facebook offic- es. Other companies like Apple have plans to establish offices in Austin, as well as Deloitte in the Phoenix area.
Marcus & Millichap released a report on population growth
to understand how the pandemic has affected the commer- cial real estate industry. According to the report, some of the primary reasons for growth in secondary markets include the financial and lifestyle advantages that smaller markets offer.
The Marcus & Millichap report states: “As more residential
and office space fills, other types of local real estate will ben- efit, from retail shopping centers to industrial facilities and
As a class, small metro suburbs was the only geographic
region that experienced a year-over-year increase for single- family home building during the second quarter relative to the year prior. Other regional declines correlated with population density. For example, the largest drop was in large metro core areas, which declined almost 18 percent compared to the second quarter of 2019. Small suburbs saw second quarter single-family construction rise 10.6 percent on a four-quarter moving average basis.
One additional factor that may impede workers from re-
turning to large cities is the increasing ability to work from home. Rapidly developing technology, coupled with employ- ers’ desire to keep their employees physically separated as much as possible, have led to a prevalence of home workers.
To capture this change, the National Association of
Realtors (NAR) developed a Work from Home Score that encapsulates nine factors that are expected to support the trend to work from home or work remotely, such as internet connectivity, home affordability, and a county’s population
2021 Self-Storage Almanac 37
even self-storage buildings. At a high level, assets in second- ary and tertiary markets have recorded tighter vacancy and stronger rent growth than comparable properties in gateway metros, drawing investor attention.”
Near term, this trend will affect self-storage and probably
accelerate a cooling off in development activity in some of these major cities. Investors are going to be more apprehen- sive about committing money over the next 12 to 24 months in some cities.
Conversely, there are investors who will take that bet and
say the market is wrong and this is the time to be building for future demand. If an entity is hunting for new projects, they’re going to be looking in the suburbs and not New York City or perhaps Philadelphia, where there is still considerable storage building happening.
Rapidly developing technology,
coupled with employers’ desire to keep their employees physically separated as much as possible, have led to a prevalence of home workers.
There is further substantiation of a population shift from
the National Association of Home Builders (NAHB). Its second quarter Home Building Geography Index shows that the only region posting a quarterly gain for single-family construction during the second quarter was small metro suburbs.
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