With the highest number of cases of COVID-19 concentrated in the largest cities in America, there is going to be a migration shift towards second-tier, 18-hour cities. What are the top COVID-19 cities to buy real estate you ask?
Cities such as New York City, San Francisco, Seattle, LA, and Washington DC are getting quite crowded. Prices are already at nose-bleed levels. True, prices are high because job growth and wages are high, but now that tens of millions have been locked down and experienced the productivity benefits of working from home, the cat is out of the bag.
After the lockdowns end, millions of Americans will want to continue working from home and millions of companies will be totally fine with the arrangement! Companies want to be more amenable to employee's needs and desires to attract and retain the best workers. In addition, companies would also like to have more space for the employees who do return to work.
The idea of employees bunched together on open floor plans shoulder to shoulder like sardines is most definitely going away. If half the employees who used to work in the office can now work from home, this solves two problems.
Let's look a the top cities to buy real estate due to: 1) COVID-19, 2) the work from home trend, and 3) migration trend away from the most dense cities in America. The best places to invest in real estate due to the coronavirus may surprise you.
Top COVID-19 Cities To Buy Real Estate
To find the best cities to buy real estate in a COVID-19 world, let's look at the best states to buy real estate in America ranked by valuation and by migration trends. It's always good to start off with a top down analysis.
Now let's cross reference the most attractive states with the most attractive cities to buy real estate provided by the Urban Land Institute (ULI), a commercial real estate institution and think tank. Below is their analysis.
You'll notice from the chart that 8 of the top 10 markets for overall real estate prospects are secondary metros (aka 18-hour cities). 8 of the top 10 markets also hail from my top 15 best states to buy real estate.
The only two cities in ULI's top 10 that are not considered 18-hour cities and are not in my Top 15 states are Boston and Los Angeles.
The Best Cities To Buy Real Estate Due To COVID-19
Below are my Top 7 best COVID-19 cities to buy real estate based on my top down state analysis, ULI's analysis, and CrowdStreet's analysis. CrowdStreet is one of the best real estate crowdfunding platforms that allows investors to easily invest in 18-hour cities.
These cities have some of the most attractive real estate valuations with also the strongest job markets. Americans will be moving to these cities and out of more densely populated cities thanks to COVID-19.
#1 Nashville, Tennessee
Tennessee is my #4 best state to buy real estate and Nashville is the top city prospect. The local mood is ebullient, with expectations strong for continued investment and development. Tennessee only has about 12,600 cases of COVID-19 as of May 3, 2020 with roughly 6,000 recovered. With a population of almost 7 million, the COVID-19 count is tiny.
On the corporation front, Nashville has Alliance Bernstein's headquarters, an Amazon operations center, and the expansion of dental products firm Smile Direct Club. There are some 8,000 new jobs linked to these firms.
Nashville is my favorite COVID-19 city to buy real estate. It is still relatively undiscovered and undeveloped with a population of about 693,000 versus New York City's population of about 8.4 million.
#1 Charleston, South Carolina
* $331,000 median home price, #19 ULI rank
When I first interviewed CrowdStreet about their favorite 18-hour cities, they chose Charleston as #1. Their reasons were due to its downtown vibrancy, population, and job growth. Based on my top states analysis, South Carolina is also my #1 ranked state to buy real state.
Charleston only has a population of about 135,000. Therefore, it is a small city that is highly attractive to big city dwellers looking to get away. As a result, I co-rank Charleston as #1, tied with Tennessee as the top COVID-19 city to buy real estate.
Employers such as Boeing and Mercedes-Benz have flocked to Charleston, among many others. Volvo recently expanded into a $1.1B factory that will hire an additional 4,000 employees. As a father of two now, I sure like the new Volvo XC90 SUV.
#3 Milwaukee, Wisconsin
* $131,000 median home price, #66 ULI rank
One of the largest real estate projects of 2018 was the $524 million Wisconsin Entertainment and Sports Center, home of the Milwaukee Bucks NBA team. The Bucks are one of the four favorites to win the NBA championship in 2020. If they don't, Giannis Antetokounmpo is probably going to leave in 2021 and join my Golden State Warriors for maximum money.
A new modern streetcar, known as The Hop, will soon run downtown within a quarter-mile of the most densely occupied office towers, including the headquarters of Northwestern Mutual, who recently invested $450 million into their downtown space.
Milwaukee also has a lower cost of doing business, especially in comparison to its neighboring 24-hour city, Chicago, which has some of the highest taxes in the country. Several companies have already made the journey north from Chicago to Milwaukee, including Gold Standard Banking (bringing 300 jobs), Vonco Products, and Colbert Packaging.
Milwaukee’s manufacturing employment comprises 14.3% of the labor force, nearly double the national average. As automation continues to improve, the city’s exposure to manufacturing jobs could negatively affect employment. However, based on current population growth, Milwaukee looks solid.
Milwaukee has a medium-to-small population of ~592,000 as of 2021. There is absolutely a long-term migration trend out of the most expensive cities in America and to lower cost areas of the country.
#4 Columbus, Ohio
* $171,000 median home price, #26 ULI rank
Columbus was the most commonly asked about city by people who read my Top States To Invest In Real Estate For The New Decade. Due to positive net migration, specifically college-educated millennials moving to downtown Columbus, Columbus' population continues to grow handsomely.
Due to the millennial migration, Columbus has a higher than average population of prime workers (employees ages 25-44). As the labor market is extremely tight with unemployment below 3.0%, the influx of quality workers is welcomed.
Unlike other midwest cities, Columbus doesn’t have a large exposure to manufacturing, shielding it from potential job loss due to automation. Alternatively, a large portion of the labor force, 16% of overall employment, is employed by the state government, providing a sturdy backbone and less office rent volatility.
Sector diversity within an economy provides insulation against economic volatility. Other expanding sectors in Columbus include education, healthcare, professional services, and hospitality.
Columbus is attractive due to its very low median home price of ~$174,000 as of 2021. The downside is the weather. It also has roughly a 900,000 population, which isn't huge, but not exactly small compared to lovely Charleston, South Carolina.
#5 Orlando, Florida
Orlando captured 1.3 percent of the 2016–2018 national investment volume, holding steady at a 1.2 percent share in early 2019, and, like Charlotte, well-exceeded its 0.8 percent share of the U.S. population.
ULI's survey highlighted Orlando as seventh in overall real estate prospects, ninth in development/redevelopment opportunities, and 17th in both homebuilding prospects and local expectations of investor demand in 2020.
Unsurprisingly, given its projected population increase of 71,000 over the
next five years, this market is overwhelmingly rated a multifamily “buy” in ULI's survey, with offices also seen as a “buy” by 50 percent of our respondents. Local experts anticipate that the expansion of the rail link from Miami—now under construction—will boost already robust tourism flows.
Orlando is very attractive because plenty of wealthy people from New York and New Jersey, the COVID-19 hot spots, will flee south. Orlando is in the same time zone, is less densely populated with only about 290,000 people, and has no state income taxes.
#6 Kansas City, Missouri
* $159,000 median home price, #47 ULI rank,
What's not to like about Kansas City except that they beat my 49ers in the 2020 Super Bowl.
A surge in downtown activity is driven by higher than average population growth, steadily growing since 2015 in large part due to a lower cost of living and the growth of jobs.
Kansas City’s unemployment rate of 3.1% is lower than the national unemployment rate of 3.6%. None other than Warren Buffet announced that GEICO selected Lenexa, a submarket of Kansas City, as its next service center.
Kansas City offered an economic incentive package to the insurance company in exchange for GEICO adding 500 entry-level jobs to the economy. Incentivizing large corporations like GEICO to move into the market will continue to grow Kansas City’s employment growth.
Biotech research also has a massive presence in Kansas City. The healthcare IT giant, Cerner Corporate, is rapidly expanding with already 900,000 sf of space in the market. After winning a $624MM contract, Cerner is expected to employ more than 16,000 people over the next ten years. Additionally, Children’s Research Institute is expanding their research arm and will soon employ over 3,000 researchers.
Along with biotech research, telecom companies like Sprint Corp. and AT&T occupy over 2MSF of office space and are major employers of the area. Kansas City has historically been more dependent on large employers like these but recently the city has had a spike in small business creation, an indicator of positive market health and investor confidence.
Due to Kansas City being centrally located geographically, the industrial sector has room to grow. Kansas City has a population of roughly 490,000. Therefore, it is a medium-small sized city.
Related: Top Real Estate Warning Signs To Be Aware Of Before Buying
#7 Charlotte, North Carolina
Charlotte, North Carolina moved up from ninth to fourth in ULI's survey as the city is attracting technology and manufacturing firms.
It's been a banking sector hub for over 20 years given it is the headquarters of Bank of America.
Charlotte (with just 0.8 percent of the U.S. population) attracted 1.2 percent of the nation’s real estate investment in the three-year period from 2016 through 2018. And stepped up to a 1.5 percent share during the first half of 2019.
It's an attractive COVID-19 city to buy real estate due to its relatively low density, established banking system, and high affordability. However, Charlotte does have a population of roughly 880,000, so it is 8X larger than Charleston, South Carolina. Charlotte's high population is why I rank the city last out of the top 7.
COVID-19 Will Change Real Estate Investing Forever
So there you have it. The top cities to buy real estate after COVID-19 are all 18-hour cities with lower valuations, strong migration trends, and higher growth rates.
COVID-19 will absolutely accelerate the work from home trend. As a result, more people will wisely decide to leave expensive, 24-hour cities, and move towards 18-hour cities like the ones I've mentioned.
The cities above were already growing at a faster rate than average with below median home price valuations. Once the economy starts opening up, expect a surge of demand in these cities.
To invest in 18-hour cities in a post COVID-19 world, check out CrowdStreet, one of the leading real estate marketplaces today. It's free to sign up and explore.
I've personally invested $810,000 in real estate crowdfunding to diversify my real estate portfolio since I own multiple properties in San Francisco. Thanks to platforms like CrowdStreet, it has never been easier to take advantage of multi-decade real estate trends in America.
About the Author: Sam worked in investment banking at Goldman Sachs and Credit Suisse for 13 years. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley.
In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $265,000 a year in passive income. He spends time playing tennis, taking care of his family, and writing online to help others achieve financial freedom too. Sam started Financial Samurai in 2009. And has grown it to be one of the largest independently owned personal finance sites in the world with over 1 million organic visitors a month.