Meet the Eight ‘New Gateway’ Cities for Investment

Much has been written about the mass exodus from dense coastal urban cities as the pandemic wears on, with markets in the Sunbelt and Mountain West reaping the benefits of that population growth. And in the future, experts at JLL expect the line between gateway and growth markets to continue to blur. 

“Gateway cities have and always will be attractive from both a resident and investor standpoint,” JLL notes in its latest investor alert. “However, the pandemic has accelerated migration trends to a handful of rising star cities and as a result, investors are following suit…Gateway markets such as New York City and San Francisco will always attract and retain both residents and companies, however the ‘new gateway’ cities will be more in favor from both classes on a go-forward basis.”   

JLL makes the case that growth markets such as Atlanta, Austin, Charlotte, Dallas, Denver, Miami, Nashville and Raleigh have already experienced population growth of between 10 and 30% over the past decade—and the pandemic has only accelerated that trend. Rent across those eight cities has also grown 37.6% on average over the last five years, versus a 17.8% national average, and they’ve shown an average 6% net absorption, compared to the US average rate of 2.1%. 

Job recovery has rebounded nearly twice as fast in these markets, and JLL notes that industry clusters are developing in the tech, life sciences, media, professional services and finance/insurance sectors in those cities.

“Companies are partially drawn to these growth markets for savings, given these markets boast an average cost of doing business index score of 94 compared to 127 in gateway markets, which is driven largely by corporate taxes being 65% lower on average,” Lauro Ferroni, senior director of JLL Research stated. “In addition, many of these cities are home to large universities that continuously supply a source of skilled talent.”

Investors are taking note: in Charlotte, for example, domestic institutional investment has increased by almost 300% since 2016, and foreign investment in the city has increased by 200%. Foreign investors have also increased investment volume by 100-200% in Atlanta, Austin, Dallas, Charlotte, Miami and Raleigh over the last four years.