Over 80 percent of the U.S. population now lives in an urban area, and that number is expected to continue to rise over the next few years. Driven by economic prosperity, emerging industries, entertainment options and accessible transportation, people are moving to cities more than ever before.
One of the most impactful industries that is positively reshaping communities is technology. Start-ups and big tech companies are attracted to cities with cheaper costs of living and affordable office space vs. the more expensive Silicon Valley and New York City locales. Cities with a historically strong tech scene continue to be enticing as multifamily investment opportunities for investors hoping to grow their real estate assets. However, not to be overlooked are cities with revitalized urban centers due to the technology industry.
Here are three cities that have a strong emerging tech scene that indicates the potential for fruitful multifamily investment opportunities:
Houston is revitalizing its Midtown neighborhood with a new development called The Ion, which will be the centerpiece of a proposed 13-structure innovation district that will exist to foster, focus and support technology, ideas, start-ups and established enterprises. The emerging Houston tech scene, which includes The Ion, is forecasted to add 4,700 professional, scientific, technical service jobs in 2020, according to the Greater Houston Partnership’s December Economy at a Glance that will further increase the demand for new multifamily properties.
Additionally, The Ion will attract new multifamily developments in the surrounding area due to the growing trend of people wanting to live near work and in a more urban environment. Houston boasts low taxes and an abundance of affordable land, which creates favorable real estate costs and ultimately favorable investment opportunities. Not only will the innovation district itself drive economic prosperity to the immediate area, restaurants and entertainment options are also expected to serve the large influx of tech professionals to the area.
Unlike neighboring Houston, Austin has had a world-renowned tech scene for years. In fact, Savills lists Austin as the eighth most important tech city in the world. Austin has been home to big tech giants like IBM and Dell for years. Over time this has resulted in a staggering 4.4 tech start-ups per 1,000 people in the city, which is far greater than other top global tech cities listed. Like Houston, developers in Austin enjoy relatively affordable land and low taxes, creating a favorable environment for new multifamily investments. Because of its well-established tech scene and low cost of living, Austin is one of the fastest growing metro areas in the country and is projected to see a 24 percent population increase by 2028.
Household technology brands Amazon and Microsoft both anchor Seattle’s economy with each employing 53,500 and 35,000 people in the region respectively. Out of all of the renters in Seattle, 15.7 percent of renters work in science, technology, engineering, or mathematics (STEAM) occupations, which is higher than most other similarly-sized cities. Additionally, Seattle is adding jobs at a higher rate than many parts of the nation, with a 3.3 percent increase year-over-year compared to the 1.5 percent national rate. Multifamily investors already are taking notice as Seattle has averaged one of the nation’s highest numbers of multifamily permits processed.
Cities are only going to continue to grow as more people flock to urban centers in search of jobs in thriving industries like the technology industry. Cities are seeing a change in their landscape as those people move into the major cities to be closer to work and entertainment options. To meet the demand for multifamily homes, developers are building upward rather than just outward. Multifamily investors hoping to capitalize in growing urban centers should do their due diligence in seeking out cities with an emerging or well-established technology scene for a high return on investment.
Caroline Kane is the CEO of CKR Management.