As we move deeper into 2021, the U.S. commercial real estate (CRE) market is poised to move beyond its trough of 2020 and enter a new cycle of growth. Thanks to a reported 3.8% increase in GDP and the mass distribution of COVID-19 vaccines, recovery comes with the anticipation of increased transaction velocity—nearly 40% increase in total U.S. CRE transactions for the next year, according to CBRE’s mid-year 2020 report. In this new cycle, certain asset classes, such as industrial, will outperform while other asset classes, particularly retail and hospitality, will likely underperform. Different metros will also recover at different rates and we heavily weighted regional factors like population growth, the employment base, and more when determining the best places to invest in real estate in 2021. CrowdStreet‘s most favored markets also exhibited a subjective desirability or competitive advantage.
Whether we label this as a metro’s “vibe” or “quality of life,” CrowdStreet’s top markets possess a curated blend of multiple tangible and intangible attributes that coalesce to create attractive communities. As our country looks to resume growth, we are keeping an eye on many of the growing secondary markets we valued prior to the pandemic. But with a post-COVID twist, we’re expanding that list with the addition of select markets within the Mountain region.
The CrowdStreet Investments team leveraged the following sources of information to determine our 2021 top markets rankings:
1. Green Street Advisors
3. ULI Emerging Trends in Real Estate
4. CrowdStreet Marketplace portfolio analysis
5. CrowdStreet Investments team experience
6. Interviews with real estate industry professionals (operators, capital markets professionals, brokers, etc.)
The best places to invest in real estate for 2021
Our clear No. 1 market for 2021, Raleigh-Durham ranks 3rd or better across four strategies. With its proximity to top universities, world class research facilities, a highly educated workforce, relative affordability, and increasingly walkable urban center, there is just so much to be bullish about regarding Raleigh-Durham’s future, arguably one of the nation’s hottest “work from anywhere” markets.
Austin is a market with an unfair number of competitive advantages. Strong population and job growth (with a thriving tech scene), the presence of the state capital, a major research university, and location within a tax-free state combine to provide a strong long-term outlook.
Phoenix is our top market in the West among the best places to invest in real estate. A 2020 exodus from urban CA locations has bolstered already strong underlying fundamentals. Arizona also ranked #5 for inbound moves in the Annual 2020 United Van Lines Moving Study.
4. Salt Lake City
Consistent population growth, low unemployment, and tight vacancies are perennial attributes of this market. Salt Lake City is maturing and becoming more institutional in nature.
5. Dallas-Fort Worth
As a technically land unconstrained market, Dallas-Fort Worth continues to unlock new areas of growth via fresh development. Consistent growth, a business friendly central location, and a favorable tax environment provide strong underlying fundamentals for both multifamily and industrial strategies.
Nashville ranks as one of our top markets from a 10-year growth perspective. COVID-19 may have inflicted damage upon its tourism sector in 2020 but, with a major airport expansion due to open in 2023, including new direct flights to and from Europe, it is poised to recover and reach record levels of visitors. Multifamily rents continue to grow at 4% year-over-year.
Life sciences leads the way for Boston, but it’s also a solid industrial and multifamily market. Its university cluster rates as #1 in the world, creating a concentration of intellectual capital that serves as Boston’s strategic advantage.
8. Tampa-St. Petersburg
With strong population growth, no state income tax, a business friendly environment, affordability, and a Sunbelt location, Tampa-St. Petersburg is an attractive market across nearly every asset class.
Home to the world’s busiest airport, Atlanta is on the move. With a large population, the highest concentration of colleges and universities in the Southeast, and a highly educated workforce, Atlanta may still classify as a secondary market, but it’s well on its way to attaining primary market status.
Boise is leading the nation in year-over-year housing appreciation, hitting a blistering 20.1% in 2020. The California-to-Idaho movement is on and Boise is poised for strong growth across every asset class. A hidden gem, Boise is not currently an institutional market but we believe it will be later this decade.
Charlotte is a banking powerhouse. It also boasts a total of nine Fortune 500 HQs, including Honeywell, Nucor, and Duke Energy. A quintessential CrowdStreet 18-hour city market with above-average population and job growth rates, yet still relatively affordable, Charlotte is our third favorite market for multifamily acquisitions.
12. Washington, D.C.
With a new administration, we anticipate growth in the federal government and, postvaccine, we expect D.C. to quickly resume its bustling activity. D.C. is also one of the most liquid markets in the world, which will draw major institutional investment as the new cycle takes hold.
Like Boise, Denver’s housing market is also on fire, setting all-time median price records this year. As a growing 18-hour city, we like most strategies in this market but its surging housing prices lead us to rate multifamily development and Build-to-Rent as our favorites.
In an Amazon dominated world, it’s hard not to like the city that houses Amazon’s headquarters, not to mention the home of Microsoft, Starbucks, and Costco Wholesale as well. Seattle is on the cusp of transitioning from secondary to primary market status.
15. San Francisco-Oakland
San Francisco was a headline city in 2020 for out-migration from its city core, with apartment rents dropping by as much as 20% from its peak. However, with disruption comes opportunity. San Francisco enters 2021 with opportunistic potential in apartments, office, and hospitality. It’s also the No. 2 life sciences market after Cambridge, MA. Finally, Oakland and other parts of the East Bay continue to rate as strong industrial markets.
Miami is Florida’s largest and most cosmopolitan metro. It also benefits from a low tax and business friendly environment that provides for above-average job growth and it’s highly land constrained. We like Miami as one of the best places to invest in real estate for its multifamily investment opportunities given its high priced real estate and it’s one of our favorite industrial markets, as well as one the top hotel markets we see bouncing back post-vaccine.
A central location and the convergence of four major interstates make Indianapolis a key Midwest distribution hub. The presence of the state capital provides a stable base of employment and, unlike its Midwest competitor cities, it’s growing faster than the national average. The cost of living is relatively low, which makes it attractive for residents seeking a more affordable lifestyle.
Orlando had a record 75 million visitors in 2018, making it the #1 tourist destination in the U.S.. While COVID-19 devastated the Orlando tourism market, it should start to recover in Q2 2021, likely making this year the final opportunity to buy low on a hotel property. With tourism the leading story in Orlando, it’s easy to overlook that it is also home to one of the nation’s largest universities, the University of Central Florida.
19. Northern New Jersey
A solid interstate system, Newark International Airport, the Port of New Jersey, and proximity to over 23 million people make Northern New Jersey CrowdStreet’s #1 industrial market for 2021. This factor alone makes it a top 20 CrowdStreet market but, with apartment rents at steep discounts to Manhattan, yet also offering more space, the Northern New Jersey multifamily market has been one of the major beneficiaries of COVID-19 induced migration out of Manhattan.
20. Inland Empire (San Bernardino and Riverside Counties)
A blue chip industrial market serving a regional population of 23 million residents, the Inland Empire also serves as the more affordable alternative for residents priced out of Los Angeles and Orange Counties. This has led to remarkable multifamily fundamentals in the form of well-above average population growth, below-average home ownership rates, and an astounding 7.7% year-over-year rent growth, and makes it one of the best places to invest in real estate.
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