COMMERCIAL REAL ESTATE: FOLLOW THE SUN

Written by: Global Thought Leadership | May 24, 2019

Chart courtesy of Clarion Partners.  Source: Moody’s Analytics, Q4 2018. Notes: 1) Based on population totals from the 18 Sun Belt states. 2) The U.S. population in 2019 is 326 million. 3) Through 2030, Texas, Florida, and California, followed by Arizona, North Carolina, and Georgia, have been each been forecasted to grow by 4.9, 3.4, 2.4, 1.6,1.6, and 1.5 million respectively.

THE CHART

The chart shows population growth from 2008-2018 and the current forecast for population growth from 2019-2030, in millions and in percentage terms for the Sun Belt and Non-Sun Belt regions of the United States.

THE BOTTOM LINE

• Over the past decade, nearly 5 million Americans have relocated to the Sun Belt—a region that includes seven of the ten largest U.S. cities.1

• The biggest winners in terms of population growth: Texas (+1.2 million residents) and Florida (+1.1 million residents).2

• Over the next decade, Sun Belt population growth is forecast to accelerate by another 19 million (+13%), but only 3 million (+2%) in non-Sun Belt states.2
• The  Sun Belt boom  continues to be driven by an exodus from high-to low-tax states with generally greater economic opportunity and affordability.
• There’s one major exception: California. The state has both high taxes and domestic out-migration—but also a huge and dynamic labor market with many vital industries.
• Clarion Partners—Legg Mason’s real estate specialist—believes attractive commercial real estate investments will continue to emerge in the Sun Belt in  industrial,  office, retail,  multifamily  and hotel properties.
• The potential benefits of a commercial real estate allocation are many—income, long-term appreciation, inflation protection, low volatility and diversification—but so are the idiosyncrasies of local markets. That underscores the value of managers like Clarion with the experience and research to address opportunities across the entire U.S.

Originally published:  COMMERCIAL REAL ESTATE: FOLLOW THE SUN

Investment in real estate entails significant risks and is suitable only for certain investors as part of an overall diversified investment strategy and only for investors able to withstand a total loss of investment.

Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.

Forecasts are inherently limited and should not be relied upon as indicators of actual or future performance.

Diversification does not assure a profit or protect against market loss.

Footnotes:

1 Source: Clarion Partners Investment Research, Q4 2018. The 18 states in the Sun Belt are located in the southeast and southwest: Alabama, Arkansas, Arizona, California, Colorado, Florida, Georgia, Kansas, Louisiana, Mississippi, North Carolina, New Mexico, Nevada, Oklahoma, South Carolina, Tennessee, Texas, & Utah.

2 Source: Moody’s Analytics. Q1 2019.