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CRE Finance World Summer 2015
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The markets projected to lead office-using jobs over the next
five years are Phoenix-Mesa-Glendale AZ: 3.5%, Austin-Round
Rock-San Marcos TX: 3.5%, West Palm Beach-Boca Raton-
Boynton Beach FL: 3.3%, Raleigh-Cary NC: 3.1%, Dallas-Fort
Worth-Arlington TX: 3.1%, Miami-Miami Beach-Kendall FL: 3.1%,
Atlanta-Sandy Springs-Marietta GA:3.1%, Charlotte-Gastonia-
Rock Hill NC-SC: 3.0%, and Nashville-Davidson-Murfreesboro-
Franklin TN: 3.0%.
Projected OUJ growth is not by itself an indicator of the long term
vibrancy of an office market. For example, high projected job
growth may be indicative of a market rebounding from significant
great recession and housing bust job losses. These markets
may also be fundamentally volatile. Other growth markets may
be concentrated in a volatile industry such as energy. Growth
markets with very low educational attainment rates may not inspire
confidence in long term stability. If we separate out the energy
markets, markets rebounding from significant job losses, markets
with low education attainment rates, and major markets, the list
favors Austin-Round Rock-San Marcos TX, Greater Miami-South-
east Florida18, Raleigh-Cary NC, Dallas-Fort Worth-Arlington TX,
Atlanta-Sandy Springs-Marietta GA, Charlotte-Gastonia-Rock Hill
NC-SC, Nashville-Davidson-Murfreesboro-Franklin TN, Salt Lake
City UT, and Indianapolis-Carmel IN.
Housing Affordability And Young Families
Housing affordability is important for employers since wages
can be lower and young families can purchase homes for less.
According to Jed Kolko, chief economist at the online real estate
firm Trulia “Cities with the strongest job markets would grow even
faster if more people could afford to live there. The additional
population would help spur further job growth, which, in turn, would
strengthen the local economy and foster more middle-class jobs”19.
Housing affordability is a significant draw for YCEs as well as
young families with children aged 5-14. This age range is important
because it encompasses when parents often move due to the cost
of housing, schools and long-term economic security20.
Domestic migration is increasingly driven by the quest for affordable
housing. The country’s fastest-growing cities are now those where
housing is more affordable than average21 .
Table 4 presents metros that in fact have a growing population of
young families as evidenced by the number of children between
five and fourteen. The top 12 markets attracting young families
with children have housing affordability indexes of 4.0 or less.
Table 4
Rise in Number of Children Aged 5–14
Source: Joel Kotkin and Wendell Cox for rise in number of children and Wendell Cox and Hugh
Pavletich, “11th Annual Demographia International Housing Affordability Survey” (2015 Edition:
Data from Third Quarter 2014) for housing affordability
The above chart lists metros attracting families with young children.
It includes markets with high growth in YCE, OUJ, and with relative
affordable housing such as Raleigh, Austin, Charlotte, Dallas,
Houston, and Nashville. The combination of affordable housing
and economic growth attract young families, which in turn fosters
further growth.22
Conclusion
The metros that seem poised for long-term growth based on the
criteria detailed in this report are Austin, Raleigh, Denver, Salt Lake
City, Nashville, and Charlotte. These markets exhibit fundamental
strength in high and/or growing education attainment levels. They
have experienced a relatively high rate of growth in the number
of college graduates aged 25 to 34, from 2000 to 2012. They
have experienced growth and/or forecast to experience growth
in office-using jobs. Housing is relatively affordable and young
families have migrated to these metros. Most of the aforementioned
metros have growing tech sectors. These office markets stand
out in several long term growth factor categories that create and
sustain office demand.
Beyond The Big Six: Identifying Alternative Us Office Markets Based On Long Term Demand Generators