💼 Superb Suburbs
briefcase | invest smarter | Issue #129
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🏡 Suburbia
The suburbs. Not just for know-it-all white women with comically oversized wine glasses talking about how much they love the fall.
The truth is that as major cities and office hubs have to adjust to the new WFH normal, the suburbs are buzzing:
📈 Growth: Between 2010 and 2020, the share of Americans living in the suburbs grew by over 10% (before the pandemic) (Axios)
🧑🤝🧑 Younger: Around 45% of millennials expect to buy a house in the suburbs as of 2022 (BofA)
👩💻 WFH: Reduced commuting frequency has been a boon for the suburban retail market (WSJ)
🤷🏼♀️ Sorry, Karen: A majority of major metro area residents in each race and ethnic group now live in the suburbs (Brookings)
Cities aren’t happy about this trend either, per WSJ:
Frustration is growing in cities that are suffering from declining real-estate values, setting the stage for lower property-tax revenues and pressuring bars, restaurants and other small businesses that rely on five-day-a-week office workers. In New York, each employee working at home rather than going into the office costs city businesses about $4,600 in sales annually
The suburbs are indeed powerful. No matter how strong you think you are, by day four, you’re eating dinner at 4 pm and asking what the weather’s like tomorrow 🤔🌦️ .
Don’t get us wrong, the burbs certainly have their downsides: Long commutes, cookie-cutter homes, and NIMBY Karens, to name a few.
But, far from sad empty strip malls and urban sprawl, there are a lot of positives to this suburban renewal.
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Suburb Renewal: Retail
According to the WSJ, a growing number of city retailers are relocating to the suburbs, due to reduced commuting frequency. In 2022, urban retail vacancies outpaced suburban ones for the first time since 2013.
As fewer people commute downtown, shopping centers and retail shops are seeing a dramatic increase in foot traffic.
✅ Point suburban retail market
Suburb Renewal: Residential Real Estate
About half of the global companies plan to cut their office space over the next three years due primarily to permanent WFH policies. Further, an AT&T study found that hybrid work will grow from 42% in 2021 to 81% in 2024. FlexJobs also found that 48% of employers maintain some form of remote work for their workforce.
And, if companies don’t embrace WFH? Most employees say they’ll be all like…
With the nauseating cost of housing these days, the move to affordability is driving many young folks to the suburbs. This will indefinitely buoy the suburban housing and rental markets as people seek out both space and lower-cost housing in our new WFH normal.
✅ Point suburban residential
Suburb Renewal: Office
Office? In this environment? Well, suburban office space is making a faster recovery from the pandemic than its urban peer. In Q2 2023, the downtown office vacancy rate surpassed the suburban one for the first time, according to CBRE.
Suburban vacancies fell to 16.8%, and rose to 17% in urban centers. And, rent growth is also higher for suburban offices…
Consider that one of the world's largest sovereign-wealth funds recently bought a majority stake in 53 suburban office buildings in a $1.1B deal. Fox Business notes that this is “a major bet that remote work will boost demand for workplaces close to residential areas.”
✅ Point suburban office
So What? WFH and a flight to affordability present opportunities for real estate entrepreneurs. Seeking out secondary and tertiary suburban markets with positive inward migration and below-market house pricing can be an opportunity for residential, office, and retail investors.
With that, we’re signing off. We must water the marigolds and grab some wine coolers before soccer practice.
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