One assumption about population migration is that people are moving from one major metro to another in search of work and lower living costs, going from gateway cities to the Sun Belt.
As often happens, common assumptions can overlook something significant. In this case, there’s an entirely different twist proven by Census Bureau data, as Hamilton Lombard, estimates program manager of the Demographics Research Group at the University of Virginia, recently wrote. Younger people are moving to small towns and rural counties at rates not seen since, at least, the 1970s.
Through the 1970s, the population size from ages 25 to 44 in MSAs with fewer than 250,000 people or in rural counties began to fall until sometime during the early 1990s when the change in population from migration crossed a zero line and became negative. This continued until early in the 2010s, when at about a loss of 1.5% annually, the trend reversed and started to climb sharply.
By 2023, domestic migration into those smallest MSAs and rural counties hit 291.4 thousand, according to Bloomberg. For the first time since the 1970s, net migration influx into these smaller places was higher than any other metro area size, including the largest, according to Lombard’s analysis.
Slightly broader, two-thirds of the growth in the 25-to-44 population has been in metro areas with fewer than 1,000,000 residents or in rural counties. These population changes aren’t returning to pre-pandemic patterns where 90% of the growth of this group was in the metro areas with more than 4 million residents, which was the trend in pre-pandemic times.
In the early 2010s, only 27% of small metro and rural areas saw growth in the 25-to-44 aged population. Since 2020, the percentage has grown to 63%, although the overall growth of the 25-to-44 age segment was similar in each time period.
As people in this group have moved to rural counties with high natural amenities, they have also become wealthier.
The shift in demographics has some remarkable implications for commercial real estate. One is where housing development could occur rather than popular larger metros in the South and West, which have seen excess inventory push vacancy rates up and rents down.
When looking at these smaller locations, developers might focus on the interests and needs of the 25-to-44 segment, recognizing that they’ve also seen income increases.
Another is whether corporations will be able to enforce their back-to-work plans. With a likely educated and skilled source of labor in these smaller towns, companies will realize that either work-from-home or satellite offices could bring in talent. Having a larger pool of candidates would likely also mean the ability to reduce employment costs.
Source: “Young Adults Fuel Revival of Small Towns and Rural Areas”
