The Sun Belt, a term that refers to the southern region of the United States that stretches from California to North Carolina, first experienced growth in the mid to late 20th Century.
From 1950 to 2000, the percentage of the country’s population in the Sun Belt region increased from 28% to 40%, according to a 2007 report by Arizona State University’s W.P. Carey School of Business. This was fueled by a policy shift to attract “high tech” manufacturing jobs with higher wages, the decline of traditional manufacturing in the Midwest, and the milder climate compared to colder northern areas, the report notes.
Since its dramatic growth began, the Sun Belt has continued to gain both economic strength and population, and was interrupted only briefly by the Great Recession of 2008-2009. However, today, the region has approximately 50% of the nation’s population and is poised to grow to 55% by 2030, according to a 2019 Legg Mason report.
Currently, six of the nation’s top 10 metro areas by population are in the Sun Belt region: Los Angeles, Dallas, Houston, Miami, Atlanta, and Phoenix. Moreover, all except for Los Angeles saw population growth of at least 10% from 2010 to 2019, according to the U.S. Census Bureau’s latest statistics. Houston had the largest population jump of approximately 19%, followed by over 18% in Dallas, both more than triple the national population growth rate of roughly 6% during that time period, according to Census data.
Three of the other four top 10 largest metro areas had population growth rates much lower than the national rate during that period – New York (1.5%), Chicago (-.1%) and Philadelphia (2.2%).
In addition to its major cities leading general population growth, millennials are moving to the Sun Belt in droves. According to a study by finance technology company Smart Asset, Texas is the number one state that millennials are moving to, and seven of the top 10 states that millennials are moving to are within the Sun Belt region. The ranking is based on the latest domestic migration statistics from the Census Bureau, which highlights that Texas had a net migration of approximately 53,558 millennials, far ahead of the runner up, Washington state, which had 31,243 millennials.
One of the reasons for the renewed dramatic growth in the Sun Belt is a relatively low tax burden, as most states, except California, offer either no corporate or personal income taxes, or otherwise very low rates. This has helped fuel rapid job growth as employers seek areas with more business-friendly policies. The Legg Mason report showed that the Sun Belt workforce increased by 12 million jobs compared to 9 million for the rest of the country over the past decade. In fact, the Dallas metro area led the country in new job creation in 2019, adding 127,000 new jobs, 30,000 more than New York City, which ranked second, according to the Dallas Chamber of Commerce’s 2020 annual economic development guide.
Ultimately, the population and job growth of the Sun Belt may bode well for commercial real estate investments in that region, as those are two of the fundamentals that real estate professionals use to determine the strength of a market. Other reasons why the Sun Belt is poised for continued growth includes lower cost of living, better quality of life and, of course, the warmer climate, according to the Legg Mason report. Those factors typically can help increase the appeal to live in certain areas.
While it is still too early to know how the virus will impact long-term demographic trends in the country, the Sun Belt’s strong fundamentals, as noted above, may help sustain its population growth. And as people continue to relocate to the Sun Belt, its attractiveness to real estate investors will likely continue to increase, especially in the multifamily space.