As the economic recovery in the U.S. continues, new real estate market trends are emerging and show a promising outlook for second tier cities. The millennial generation – which has predominantly lived in the first tier cities, like DC, Boston and New York – isn’t willing to let go of the convenience and thrill of living in a city, but isn’t willing to put up with the poor schools and high cost of living present in the top five.
Big city problems
According to a USA Today piece that examined cities’ efforts to keep millennials from moving to suburbs, the chief complaints have to do with the poor quality of inner city schools, the high cost of even modestly sized apartments and the lack of open space. Cities began working to attract young professionals and students 10 years ago with investments in housing, railway systems and opportunities for entrepreneurship.
“Cities began renewal efforts by offering a young adult-focused lifestyle,” Robert Lang, urban affairs professor at the University of Nevada-Las Vegas, told the news source. “It was like an extension of dorm life after college. Cities assumed that they would get to the business of improving schools and providing more family services later. Well, now it’s later.”
Hooked on amenities
At the same time, cities offer amenities and opportunities that millennials are loathe to go without. Mass transit is crucial for millennials, many of whom prefer not to drive when possible. A sharing economy a la AirBnB, Uber and DogVacay is also a priority for some members of this generation – and these apps are generally only active in the city.
“I can walk to a BART station. I can ride my bike to downtown Oakland,” Oakland parent Brooks told USA Today. “Even if we decide to send her to private school, we’re not going to move out.”
Top second tier cities
Many millennials are finding the perfect balance of big city amenities and small town affordability in so-called second tier cities. The result is increased investment and a stronger real estate market. According to The Wall Street Journal, the pickup in construction activity that came to New York, San Francisco and Boston just a few years after the recession is finally hitting cities like Atlanta, Chicago, Las Vegas and even smaller second-tier cities.
Forbes recently looked at the metropolitan areas that are seeing the highest increase in millennial population, with surprising results. San Antonio, Texas saw the highest growth between 2010 and 2013, at 9.2 percent. Next was Riverside-San Bernardino, California, at 8.3 percent; Orlando, Florida, with 8.1 percent; Miami, Florida, 7.7 percent; and Detroit, Michigan, 6.8 percent.
As the millennial generation gets older, this massive 86 million strong generation will want different things. Real estate professionals who live and work in second- and third-tier cities should be aware of this trend and be ready to meet their needs.