Second tier cities, also known as 18-hour cities, are seeing an increase in desirability and popularity — not only for individuals, but also employers and real estate investors. Historically, 24-hour cities like New York or Los Angeles, have been the most popular with these groups, but with many market factors coming into play for those primary cities, people are turning to 18-hour cities instead.
What’s an 18-hour city? The difference is that these cities are not operational 24 hours a day like New York City and its counterparts. Why are these cities becoming more attractive and what is the allure? Let’s look at some things to know about these second-tier cities.
1. Cost of Living
The demand for urban living is stemming from the desirability of individuals looking to have a live, work, play environment in which to reside. Due to the high demand, it has created the expected market reaction by decreasing supply as well as rising prices. Not only are many residences in these areas becoming out of reach financially for many, the additional costs of living are also higher in most cases.
18-hour cities are attracting both employees and employers by having lower costs of living. For example, New York was reported at $72.63 per square foot and Denver was reported at $26.28 per square foot. A huge difference.
2. Business Opportunities
Not only is the cost of living in 24-hour cities high, so is the cost of doing business. Due to this, 18-hour cities are seeing an influx of employers and entrepreneurs as well. The attractiveness of lower costs is combined with a strong workforce, as well. The strong workforce comes from the fact that many millennials are heading into these 18-hour cities.
What makes the millennial workforce strong is that they are tech savvy, are just in the beginning stages of their career, and have a creative mindset. All traits desired in these companies and startups.
3. Investment opportunities
Investors are also getting in on the 18-hour city action, as the same traits that are attracting residents and employers are appealing to them as well. With population rising and most of these cities seeing occupancy rates rise (as well as rents) rise with the increasing demand, there is still room for investments to grow their potential yields. In comparison to the “big six” 24-hour cities, the cost of entry for investment is far lower and opportunity for growth is better.
4. Live, Work, Play
The true allure of any urban area is the ease of accessibility to not only a place to work, but also a place to enjoy entertainment. The 18-hour cities contain many of the amenities that a 24-hour city would —like an active downtown area with shops, restaurants and clubs that keep the city alive past the regular work day.
There are many factors creating an allure to these types of cities and the population is only expected to grow in the coming years. For those looking to invest in commercial real estate, these are definitely markets that should be considered and watched.