Why do people go to Phoenix, Tucson, Las Vegas, Austin, and Nashville instead of others? Their economies are thriving and expanding, and their governments actively foster ambitious growth while protecting each city’s character and set of amenities. Likewise, the populations in these Sun Belt locales are expanding as more and more people are drawn there by the prospect of better job prospects and the all-year pleasantness that comes with living in these places.
Another thing these five cities have in common is that they are all on our list of Multifamily Markets to Watch. We anticipate that the multifamily investment possibilities in these city centers will remain strong at least through 2023.
Companies and individuals are moving to Phoenix because it is a more cost-effective and tax-friendly option than California, even though the two states share similar climates and lifestyles. More than 33 million people remain within a day’s truck haul from the city, making it an attractive option for national businesses looking for cheaper industrial and storage property. Korea’s LG, which aims to develop an electric car battery plant in the area, and three electric vehicle startups, Lucid Group, Nikola Corp., and ElectraMeccanica, have high hopes for the region’s potential as a hub for auto manufacture. In northern Phoenix, the $12 billion facility of Taiwanese semiconductor giant TSMC is currently under construction. Intel, headquartered in the United States, intends to invest $20 billion in expanding its chip-manufacturing facilities in Chandler, southeast of Phoenix. This expansion is scheduled to be completed in 2024.
Multifamily standpoint: Strong submarkets for multifamily housing have emerged. It is due to a supply-demand imbalance brought on by a continuous influx of jobs and people. Having invested in Phoenix, we expect its low cost of living to persist through at least the end of the year.
Tucson is close enough to Phoenix to take advantage of its proximity to the state capital without sacrificing its unique character or lower cost of living compared to Phoenix. The city provides access to state financial incentives to entice major corporations and the high-paying jobs they provide. The city has been offering incentives to attract businesses like Caterpillar, which moved its regional headquarters there in 2017 and brought 600 jobs with it, and Leonardo Electronics, which is investing $100 million in a new semiconductor laser manufacturing facility, will create 170 new positions. The defense industry, state and municipal governments, the surrounding U.S. Air Force base, and the health care industry are all major economic drivers. The federal infrastructure bill from 2016 could provide funds for a proposed passenger rail route.
Multifamily standpoint: Although we do not have any active investments in the area, we have been conducting research. This research identified several promising areas where we anticipate a considerable increase in multifamily rents.
Las Vegas, reeling from the effects of the 2008 financial crisis and the COVID-19 pandemic on its tourism industry, has redoubled its efforts to expand outside the entertainment industry, despite setting records in pre-tax casino income in 2021. Healthcare, banking, logistics, and technology are just some sectors the Las Vegas Global Economic Alliance hopes to entice. An industrial building costing $327 million is planned for the city’s southeast. The $1 billion Gemini Solar Project, a solar-energy initiative expected to be finished in 2023, is also on the cards. However, the importance of tourism remains. The completion of three casino and hotel projects for a combined $4.7 billion is expected over the next two years. Next year marks the start of construction on an $8 billion high-speed rail project connecting Los Angeles and Las Vegas. Since almost a third of the population is employed in that round-the-clock sector, there is never any open rush hour. The city’s outskirts, with their underappreciated natural beauty, are easily accessible. All of this is enticing younger job-seekers to make the city their permanent home.
Multifamily standpoint: We plan to research Las Vegas as a viable investment location due to the city’s tremendous growth potential due to years of a shortfall.
It’s still a hotspot thanks to Austin’s high-tech, robust demography, attractive recreational opportunities, and its lack of an individual income tax. In 2020, Oracle, a software company, relocated its headquarters from California. In 2020, Tesla established its headquarters in the area east of the city, where construction of the company’s Gigafactory began. Apple is establishing a $1 billion campus in north Austin this year, which will initially support roughly 5,000 employees in engineering, research and development, operations, and other roles. In comparison, Korean electronics giant Samsung will build a $17 billion semiconductor factory in the area. Young, tech-focused workers who have made the city their home have a lot to do in their spare time, and the city’s vibrant music, cultural, and culinary sectors provide plenty of options.
Multifamily standpoint: We’ve allocated resources here because we believe the market has a longer runway for growth than others. We expect multifamily construction to be promising for at least the next few years.
Newcomers flock to the state capital of Tennessee for its strong pro-business environment, low cost of living (thanks to a lack of an individual income tax), and a mild four-season climate. During the epidemic, entertainment opportunities slowed but did not completely stop. Meanwhile, the Nashville Soccer Club launched a privately funded $335 million soccer stadium last spring. The Tennessee Titans football team is negotiating the contract to develop a replacement stadium in Nashville for up to $1.2 billion. Alliance Bernstein, a global asset management organization, said in 2018 that it would relocate its headquarters from Manhattan to Nashville, bringing $70 million in new investment and 6,000 employees. The company cited reduced taxes, housing costs, and commuting times as reasons for the relocation. In addition to the downtown office tower Amazon completed last year, they want to open a second one soon. Also, the East Nashville location cost $254 million, part of Oracle America’s $1.2 billion investment to build a regional headquarters. GM is planning to build a second battery plant for their electric vehicles, and with that $2.3 billion investment comes the creation of 1,300 new jobs.
Multifamily standpoint: The projects in Nashville are positive. Although costs are rising, they are still very low, and the area is expected to remain one of the fastest-growing markets until at least 2023.
In Summary
While we are mindful that real estate markets are constantly in flux, we do our best to target areas where demographic and economic trends indicate promising developments. We see many reasons for hope in these five cities.
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