Domestic migration into Sun Belt markets is slowing
- Jacob Rowden
In tandem with recent corporate mandates to return to the office, net domestic migration out of gateway cities such as San Francisco, Los Angeles and New York slowed during the fourth quarter of 2022.
Sun Belt markets saw considerable population growth throughout the pandemic, with employees drawn to affordable housing, lower taxes and higher quality of life. With remote work policies being reevaluated, and affordability advantages dwindling, Sun Belt markets are losing some velocity.
Most gateway markets have historically been an engine for out-migration, with large population centers dispersing throughout the country: from 2015-2019 gateway market metro areas saw nearly 125,000 residents move out per year, with more than 20% moving into the eight listed growth markets.
Corporate relocations chasing labor force migration have slowed over the past six months as large lease transactions become scarce, but large companies continue to expand footprints in gateway markets: Goldman Sachs is intending to break ground on a new campus in the Las Colinas submarket of Dallas in Q1, despite announcing large-scale layoffs nationally this month.
As the pace of migration slows and office re-entry mandates become more commonplace, the gap that emerged between gateway and growth market leasing volume has narrowed in the past six months, but remains prominent: Sun Belt growth markets have returned to over 80% of pre-pandemic leasing volume over the past 12 months, while gateway markets remain below 65% of pre-pandemic levels.