These Smaller Cities Are Magnets for New Residents

Migration Trends Uncover Hidden Gems in the Sun Belt and Mountain West


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While larger markets typically capture population growth and migration headlines, there are plenty of smaller or mid-sized cities in the United States that are gaining residents at an impressive pace.


Many of these areas are highly dependent on domestic net migration and are likely benefiting from the influx of remote workers and retirees seeking affordability, lower taxes and better weather.


Commercial real estate investors who are looking to diversify their portfolios have been increasingly enthusiastic about these secondary and tertiary markets. However, smaller markets, which can provide higher returns, are often considered risky, as they can be illiquid from an investment perspective because of their size, inaccessibility and investor unfamiliarity.


By understanding population growth trends and the drivers behind them, investors can help break through those real and perceived barriers and gain confidence in deploying capital in smaller or lesser-known metropolitan areas.


As is the case for the largest markets, the strongest regions for population growth in relation to their mid-sized cities are the greater Sun Belt and the Mountain West regions. Individuals continue to flock to these areas for their affordability, abundant job opportunities and low taxes.


A common downside of moving to a mid-sized market is the lack of large, established and diverse cultural and institutional amenities, such as large universities, air and transit accessibility and major corporations. Since the pandemic, though, smaller and less-dense cities that don’t rely on public transportation have attracted plenty of new residents. The effects of the public health crisis may have at least temporarily benefited these often-overlooked metropolitan areas, especially as more companies are giving employees the flexibility to work remotely.



Among the metropolitan areas with a total population between 500,000 and 1 million, Boise, Idaho, led the way with more than 20,000 residents gained in 2020. The region was 19th in overall nominal population growth last year, despite ranking only 82nd for total population. And Boise’s 2.7% growth rate ranked second only to Austin, Texas, on a percentage basis.


Other Mountain West markets in the top 20 for strongest population growth include Provo and Ogden in Utah and Greeley in Colorado.


However, the big standout in the latest census data is Florida, which placed eight metropolitan areas in the top 20 for nominal population growth among mid-sized cities.

While many of these cities are known as retirement havens, it’s not just the influx of retirees that is driving population growth in mid-sized Florida markets, according to Brian Alford, CoStar's director of market analytics for North and Central Florida.


“These cities are adding jobs in the medical, retail and industrial sectors in order to support increased consumer spending levels, which in turn, is boosted by the strong population growth trends,” Alford said.


Tourism is also usually a huge driver, especially in Daytona and Fort Myers, added Alford.


The surge of new residents to these areas produces some interesting results when separating population growth by source, including domestic net migration, international migration and net births and deaths.


Some of the nation’s largest markets, including New York, Los Angeles and the Bay Area, are highly dependent on international migration, but suffer from net domestic outmigration.


But many of the top mid-sized gainers are solely dependent on domestic net migration. In fact, a few of the top 10 mid-sized cities for population growth posted domestic net migration figures that were higher than their respective population growth totals due to deaths outpacing births or net losses in international migration.


In one of the most extreme examples, the Daytona Beach region recorded a loss of 3,700 residents because of net births and deaths, and only saw an increase of a few hundred residents via international migration. However, the area added more than 13,000 residents through domestic net migration last year, more than making up for the decrease in natural population and the meager gains in international arrivals.


Other cities experiencing the same type of domestic gains were the well-known retirement havens of Port St. Lucie and Sarasota in Florida and Myrtle Beach in South Carolina. In fact, Myrtle Beach is only one of a handful of metropolitan areas that exceeded the growth seen in Austin, the fastest-growing large market.



And the pace of those domestic gains accelerated across most of these cities last year. Overall, almost every metropolitan area ranked in the top 20 for domestic migration in 2020 outpaced its respective annual average dating back to 2015, a likely sign that there was at least somewhat of a pandemic effect impacting migration flows to these areas.


Source: 2021 CoStar News.

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