Every developer, every broker, every investor, every HGTV show, every house hunter, everyone says it, “Location, location, location.” This is more than just a catchphrase. When it comes to real estate, it is the gospel.
I’m often asked, “What real estate markets are you investing in?” The answer makes me smile as the data and trends consistently point to the “Smile States.” This term commonly represents the East, and West Coasts joined by the Sunbelt. The markets in which people seek to invest generally consist of two metro types: major urban areas along the coasts (known as gateway metros) and markets arcing across the Sunbelt (known as growth metros).
If you were to plot the locations on a map where Jackson-Shaw has invested, it would roughly form a familiar shape — a smile. This includes our Renaissance Hotel and Parc Post in Las Vegas; Element Hotel at Skysong, Parc 17 and Parc Germann in Arizona; Parc Santa Fe in Colorado; a myriad of urban industrial and hospitality throughout Texas; International DC 1 & 5 and Jacksonville International Tradeport in Florida; and Brickyard and Andrews Federal Campus in Maryland.
The top-performing markets – Atlanta, Austin, Boston, Charlotte, Dallas-Fort Worth, Denver, Jacksonville, Las Vegas, Los Angeles, Nashville, Orlando, Phoenix, Portland, Raleigh/Durham, Salt Lake City, Seattle, Tampa/St. Petersburg, and Tucson – are a mix of gateway and growth metros, and all are within the Smile States. These commercial real estate markets stand out due to a combination of key indicators: population increase, economic strength, diversified employer base, job growth, affordability, and quality of life.
Consider, too, that low state taxes (none at all, in some cases) are a significant draw.
Property development and maintenance are generally less costly in warmer climates. Likewise, the trend of Millennials and younger generations moving to southern states has not been lost on major employers, many relocating or expanding in these areas.
Geographic diversification is a crucial component to achieving lasting and predictable investment performance. Real estate markets do not respond the same way during economic downturns and recessions.
While it is difficult to determine the long-term sustainability of these trends, they appear to be entrenched for the near term. There is no doubt that 2020 was a transformative year in commercial real estate. Looking into 2021 and beyond, I expect continued industrial demand will remain strong, multifamily will continue to grow, retail will evolve, and interest rates will remain low. In the end, smile a little more and regret a little less.
Michele Wheeler is president and chief operating officer for Jackson-Shaw.