Housing Demand Rises in and Near Central Business Districts
For more than half a century, suburban growth surpassed growth in cities — in both population and job growth — but that is changing.
We’ve heard for several years now that the Millennial Generation prefers to live in city centers and close to their place of employment. Now we are beginning to hear about jobs moving back into city centers from suburban environments.
For the real estate investor, this trend could open up opportunities for a robust return on investment in housing located close to the urban core in cities around the nation.
The country’s largest metropolitan areas are recording faster job growth downtown — in the city core — than areas located further from the city center, according to research by the think tank City Observatory, which analyzed census data.
City Observatory looked at what occurred between 2007 to 2011 and compared urban cores to their peripheral areas. It defines a city center as the area within 3 miles of the center of each region’s central business district.
In city centers, jobs grew at a 0.5 percent annual rate, but in the surrounding peripheral portion of metropolitan areas jobs declined 0.1 percent per year. City centers out-performed the surrounding areas for job growth in 21 of the 41 metropolitan areas examined.
As recently as 2002-2007, peripheral areas were growing much faster (1.2 percent annually) and aggregate job growth was stagnant in urban cores (0.1 percent).
The strength of city centers appears to be driven by a combination of the growing attractiveness of urban living, and the relatively stronger performance of urban-centered industries (business and professional services, software) relative to decentralized industries (construction, manufacturing) in this economic cycle.
Many companies have announced that they are moving to or expanding operations in city centers, in large measure to take advantage of the growing number of younger workers living in close-in urban neighborhoods.
THE EFFECT ON HOUSING
City centers often play a unique role in the local housing market. They generally have the highest density of housing, and the proximity to services and employment is valued by some high-income households and households without cars. Often the housing located right in the city core is in the form of high-rise condominiums and apartment buildings, which can be expensive.
More moderately priced single-family housing can often be found close-by, however. In some cities, older, depreciated housing in or close to the center is the most affordable for low- and moderate-income households. B2R Finance believes that these moderately priced homes very close to the city center could hold potential as acquisition targets for single-family rental investors.
This proximity to employment and other amenities can provide opportunities for lower and moderate-income citizens to enjoy the convenience of living near city centers. These homes, as rental property investments, also hold potential for rental growth and strong occupancy levels as the demand for urban housing grows in many metropolitan areas nationwide.
For more information about how B2R can help you obtain rental property financing to grow your business, just call 800-227-8107 or visit www.b2rfinance.com/borrowers and follow us on Twitter @B2RFinance.
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