New York City may be the city that never sleeps, but it isn’t the only one that qualifies for the title. For residents of big urban ecosystems like Tokyo, Cairo, Madrid, London and Washington D.C., streets are nary empty and the nights as bustling as the days.
These 24-hour-cities boast strong economies and employment opportunities galore, not to mention high noise levels. Though their real estate markets are as choice as they come, there’s a new star on the horizon in this regard: the 18-hour city. As it turns out, these mid-sized metropolises may be the next type of location to get investors salivating.
Secondary cities rising
Twenty years ago, two distinct trends were defined in the overall landscape of cities: large, 24-hour cities and smaller cities running off of 9 to 5 business hours. These distinctions have been used to inform real estate trends for decades, and to little surprise the larger cities have historically demonstrated most promise.
But just as not everyone is tall or short, black or white, old or young, not all cities fall into two categories. Medium-sized cities have developed an extremely attractive in-between status, by which nighttime business extends longer without sacrificing all restive hours. And just like Goldilocks’ famous porridge evaluation, some investors think this middling temperature is just right.
Somewhere in between it’s slumberless metropolitan brothers and sleepy little sisters, 18-hour cities’ sweet spot makes for great growth potential: they are rapidly on the rise and ripe for property investment. Also called secondary cities, 8-hour metropolises boast a wealth of culture and personality with lower costs of living and working.
Laws of attraction
While gateway cities remain as popular as they are pricey, 18-hour cities don’t share the same burdens of overcrowding, global competitiveness, or inflated prices and egos. They are the cool up-and-coming spaces where people can live and work as they would in a bigger city with only a fraction of the cost to their soul and bank account.
For real estate investors, 18-hour cities possess two important factors that generate attraction:
18-hour cities have in common an above average urban population growth rate. This is significant, because the higher this rate, the more highly rated the market is. Central to this trend is downtown revitalization brought about by modernized housing and infrastructure.
Developments that make central urban spaces more walkable and livable attract populations willing stick around instead of commuting to and from the suburbs daily. More residents means more after-hour business, local commerce and overall profit. The right mix of residents, including affluent spenders and young, urban creatives, make the pay-off even greater.
Vibrant and growing communities increase population density, which strengthens property value and attracts investment capital in turn.
2. Small businesses
Though there will always be landlords chasing big corporations, the value of small businesses, startups and entrepreneurship are becoming incredibly clear. Today, businesses with 50 or less employees have pulled well above their weight since the end of the recession, accounting for 43 percent of all job growth in the US. For comparison, large companies with 500 or more employees contributed to just 17 percent.
What we’ve seen happening is this: people are attracted to cities with low costs of living, and the jobs are chasing them there. Affordable cities with energetic downtown communities are hubs for startups and small businesses, which can thrive tremendously in lower-cost climates. Real estate insiders following this lead may uncover massive business opportunities and yields.
Markets to watch
Investor interest in 18-hour-cities has been growing, and it’s a trend that is expected to mark 2016 in particular. Some secondary markets are even expected to outperform those of cities where costs of living and business are especially high.
PwC’s 2016 Emerging Trends in Real Estate report named eight 18-hour cities in its top 10 markets to watch, with secondary cities like Dallas, Austin, Charlotte, Seattle, Atlanta, Denver, and Nashville out-ranking cities like Los Angeles and San Francisco.
Though 24-hour-cities are unlikely to lose their star power, 18-hour-cities are now sparkling firmly in investors’ line of sight. The trend suggests that the brightest planets aren’t necessarily the biggest. Too much weight and cost can bog down speed, but 18-hour cities may just have the slickness to go the distance.
Featured image: Brett Weinstein via Flickr