When thinking about domestic migration, the Sun Belt region is often the first place that comes to mind. In fact, nine of the top 10 states with the largest net population gains in 2021 were in the Sun Belt, according to the Census Bureau. However, the Mountain West region has also been gaining steam and seeing substantial population growth of its own.
The Mountain West region, typically defined as states encompassing the Rocky Mountains, is booming due to its affordability, job growth and quality of life, especially for those that take advantage of the great outdoors. Cities such as Boise, Idaho; Colorado Springs and Fort Collins, Colorado; and Salt Lake City, Utah have had tremendous population and employment growth over the last decade — and the trend shows no signs of slowing.
The migration to the Mountain West began prior to the COVID-19 pandemic and accelerated during the outbreak as Americans desired more spacious homes in less dense areas at inexpensive prices compared to coastal cities. The pandemic also expanded work-from-home opportunities, which allowed people to untether themselves from their employers in larger urban areas.
The Mountain West region has had an average annual population growth of 12.8% over the past decade, more than double the national average of 6%, according to GlobeSt.
The increased population growth has resulted in heightened rental demand and double-digit rent growth for numerous Mountain West cities. Over the past 12 months, Salt Lake City rents have risen 17.4%, Boise rents have increased 13.7%, and rents in Fort Collins grew 12.7%, according to CoStar. In Colorado Springs, rents were up more than 17% for 2021, eclipsing historic highs, according to The Gazette.
Additionally, the Mountain West has thriving economies with low unemployment rates that were typically lower than the national rate of 4.2% in November 2021. Boise and Salt Lake City’s metro areas boast unemployment rates of 1.9% and 1.4%, respectively, and Fort Collins has an unemployment rate of 3.8%, according to the latest information available from the U.S. Bureau of Labor Statistics.
Many companies have also taken notice of the Mountain West and are relocating offices to the region to take advantage of the affordability and distributed work models, according to GlobeSt. These cities also have high opportunities for jobs within the technology sector. Colorado Springs has a collection of more than 250 defense and aerospace companies for example, according to the Colorado Springs Chamber of Commerce, Boise is challenging Portland and Seattle to be the next Silicon Valley, and tech companies moved to Salt Lake City in droves.
SFR and BTR in the Mountain West Multifamily Real Estate Explosion
Many of those moving to the Mountain West cities are people living in more dense metros. Residents relocating to Boise are looking to avoid high housing prices in California, according to The New York Times. Colorado Springs, which is attracting people from around the nation, is even luring residents from nearby Denver, according to The Economist.
As a result of the population boom, most Mountain West cities have multifamily vacancy rates under 5.5% and even as low as 3.9% in Fort Collins, CoStar data indicated.
To meet the demand of incoming residents, real estate investors and developers are beginning to focus on single-family rentals (SFR) and build-to-rent (BTR) communities in the region. This burgeoning asset class took off during the COVID-19 pandemic as residents around the country searched for homes with more privacy and space for remote working and learning.
SFR rents nationally across major metro areas increased 10.9% year-over-year in October 2021, triple the rate of October 2020, according to property information provider CoreLogic. Institutional investment firms are allocating more capital to the SFR and BTR space as demand has increased from tenants.
The Mountain West is an attractive region for more SFR and BTR development because of high demand for rentals due to its strong population growth, and because there’s more space to build this asset class and the required land is more affordable to acquire than dense cities. The Mountain West is an exciting high growth area that investors may want to keep on their radars, especially as the SFR and BTR sector continues to explode.