For buyers and developers looking to invest in commercial real estate, there are four cities that, as of Q1 2023, indicate the most affordability. Those cities include Dallas, Nashville, Houston, and Atlanta.
Let’s take a look at the numbers in more detail.
#1 – Dallas, TX
In 2022, Dallas saw elevated levels of commercial real estate activity, and that activity has flowed into Q1 2023, as well. This increase in activity has been attributed to job growth and notable relocation to the Dallas-Fort Worth area.
- Multifamily: The multifamily market in Dallas is lucrative because of the lower costs of rent. In Dallas, many families find it more economical to rent than to buy a home, which has resulted in an increase in demand for rental properties.
- Office & industrial: Since job growth and relocation to the Dallas area have increased, so has the need for office and industrial spaces.
- Retail: Retail space hasn’t been as lucrative as other markets in Dallas as of Q1 2023.
One of the biggest reasons that CRE is more affordable in Dallas is that the city’s property rates are anywhere from 5% to 15% below market value.
#2 – Nashville, TN
Nashville is an affordable place to live and invest, with no personal income tax and a business-friendly commercial real estate market. The area has seen steady growth in population, which has also contributed to the city’s growing commercial activity.
- Multifamily: With more and more people flocking the area to live, work, or visit, demand for multifamily properties has risen. New developments in Nashville also continue to fuel more demand for multifamily properties.
- Office: With job and population growth, businesses are investing in more office space to hold their employees.
- Industrial: At the end of 2022, Nashville had the lowest vacancy rate in the nation for industrial real estate. Because industrial real estate is so affordable and lucrative in Nashville, it doesn’t stay on the market long.
- Retail: The growth in Nashville has also flowed into the city’s retail market: More shoppers means more shops and stores.
Nashville also provides certain incentives for businesses: Businesses in Nashville are able to apply for grants and tax exemptions if they’re eligible for these programs.
#3 – Houston, TX
Houston is home to lots of different kinds of businesses and has a huge oil and gas market. The city is one of Texas’s biggest and continues to see a steady influx of people moving into the area. There are over 23 Fortune 500 companies that operate out of Houston.
- Multifamily: As the population in Houston steadily grows, so does the demand for multifamily housing. The rental market in Houston in Q1 2023 has been competitive so far, with an apartment occupancy rate of over 94%.
- Office: An influx in residents has contributed to a higher demand for office space.
- Industrial: A shifting supply chain is contributing to a high demand for industrial space in Houston, as more and more square feet are delivered.
- Retail: Retail space is also becoming more in demand as more businesses open retail locations in Houston.
Houston’s relatively low cost of living compared to other major cities in the US is one of the many reasons it remains an affordable and attractive place for CRE investors.
#4 – Atlanta, GA
The population in Atlanta has increased by over 14% in the last 10 years alone, leading to job growth and higher demand for more commercial space. Atlanta also has a lot of developable land available, permitting plenty of opportunities for CRE sponsors & builders.
- Multifamily: The multifamily market in Atlanta is the second strongest in the country and one of the best places for multifamily investment.
- Office: Atlanta’s office market is another strong one: At the end of 2022, Atlanta saw a large office space of 52,000 square feet filled, which was one of the largest move-ins the city had seen that year.
- Industrial: Atlanta Industrial properties are in demand due to the large number of businesses that continue moving to the area.
- Retail: The retail market is one sector that doesn’t thrive in Atlanta. Currently, the city is seeing a shortage of available retail space in the midtown and downtown areas, making it harder to develop and/or invest.
Atlanta also has a relatively low tax rate and “pro-growth” initiatives that make it attractive to potential commercial buyers and investors.
