People Keep Moving to the Sun Belt, but the Pace Has Slowed

Affordability and abundant employment opportunities drove people to the Sun Belt at a slower pace while they still moved away from gateway markets last year, according to the latest net migration data from the U.S. Census Bureau.

While the movement of people away from expensive cities to more affordable metropolitan areas is nothing new with Sun Belt states long leading the nation in net migration, population losses in many large gateway markets were more severe than usual in 2020. That’s probably because of weaker international migration from the pandemic and a further drop in immigration levels from 2016 to 2020.

Furthermore, domestic migration trends accelerated for a few cities, with people increasingly moving from dense, expensive and transit-dependent markets to sprawling cities that were quicker to reopen. Remote work also gave more people the flexibility to live and work from anywhere. However, even some fast-growing Sun Belt cities saw a slowdown in net migration last year, particularly those areas that rely more heavily on immigration.

Net migration is a crucial demand driver that commercial real estate players carefully track. The movement of population from one metropolitan to another represents net new demand for space, which increases the need for housing, leads to new jobs that require additional office square footage and means more spending power, which benefits the industrial and retail sectors.

The latest Census data does not paint a full picture of where people moved during the pandemic. The data covering July 2019 to July 2020 includes the period of stay-at-home orders that kept people from moving. The full impact of the pandemic will be better reflected in the next data release, scheduled to come out next year.

The chart shows 2020 figures as well as the average annual net migration recorded for some of the nation’s largest and most dynamic markets since 2015. This way, it is possible to visualize whether 2020 represented a positive or negative departure from the longer-term trend.

Places such as New York, Los Angeles and Chicago, the three largest metropolitan areas in the country, all recorded negative net migration in 2020. In fact, net out-migration for each of those metropolitan areas was greater than their respective annual averages since 2015, an indication that the lack of international migration continued to weigh on the nation’s largest and most expensive cities.

Only a handful of areas boasted stronger net migration figures in 2020 compared to their annual five-year averages. Phoenix and Austin, Texas, stand out, as these markets benefit from proximity to more expensive metropolitan areas and boast a low regulatory environment, two advantages that became even more attractive during the pandemic. Both markets have also attracted major corporate relocations and expansions that are expected to generate thousands of new jobs, including by TSMC and Intel in Phoenix and by Tesla and Oracle in Austin.

Zooming in on the middle of the chart above, the first thing that stands out is that almost every market falls below the reference point line, which indicates that net migration was down almost everywhere last year compared to the prior five-year average. Only a handful of places such as Tucson, Arizona; Tulsa, Oklahoma; and Oklahoma City outperformed their respective 2015 to 2020 net migration totals last year. Las Vegas; San Antonio; and Raleigh and Charlotte in North Carolina were roughly in line with recent trends.

Metropolitan areas that rely heavily on international migration saw a more notable drop off in net migration last year. Net migration in places such as the San Francisco Bay Area, South Florida, Boston and Washington, D.C., was weaker in 2020 compared to the five-year average, as population growth from international arrivals was not strong enough to offset domestic out-migration.

Atlanta and Orlando remained positive in terms of net migration last year, but both cities saw a notable slowdown compared to prior year norms. International net migration to Atlanta was down roughly 7,000 individuals compared to its average annual figure recorded since 2015, and Orlando was more than 9,000 people off its recent average.

Narrowing down population trends to look only at domestic net migration shows that net out-migration accelerated in New York and Los Angeles and in-migration picked up in Phoenix and Austin, dovetailing with the overall migration story.

Miami, which had a weaker performance in overall net migration, shows that its domestic migration actually improved slightly from the recent average. Miami typically benefits from strong international migration trends, and international migration peaked in 2017 with more than 53,000 people moving from other countries to Miami. That figure dropped to under 29,000 in 2020, illustrating the slowing international migration nationwide.

By and large, most markets came in close to the recent average, but some markets saw notable declines in domestic migration compared to their recent averages as well.

Outside of the aforementioned Bay Area cities, Orlando stands out as being further out from the line. Domestic net migration to Orlando was roughly half of the region’s recent annual average last year. With this data only reflecting the trends early on in the pandemic, it’s likely that Disney’s closure caused residents to seek opportunities elsewhere, perhaps assisting Tampa’s stronger-than-usual performance.

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