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There is no debate that large Metropolitan Statistical Areas (MSAs) act as their own economies, drawing in jobs, consumers, housing, new development, and redevelopment - all of which work in unison to increase the value of real estate assets across all sectors. The main driver of this change, or at least an influential catalyst, is employment opportunity. When combining employment opportunity with a lower cost of living and stable inflation, population growth is immensely impacted, and a perfect storm is created for real estate opportunities. Population growth hedges against real estate downturns, lowering the risk of an investment. The influx of population increases the demand for housing, retail shopping, schools, and infrastructure. An increased demand for housing leads to new development of vacant parcels as well as redevelopment of aging property and the value of real estate begins to rise. Real estate values increase annually under this scenario without much modification from the investor. As a result of real estate values increasing, opportunities arise for higher rents per square foot, vacancies are easier to absorb, and retail sales increase, providing more security to owners.

But what happens when you own real estate in an area that has declining demographics, or jobs moving away from the area because it’s too expensive to live and prosper? When businesses move, people can’t afford to live in the same location, disposable income lessens, retailers store sales fall - their businesses decrease, residents leave to pursue better job opportunities in other cities, retailers follow them, and real estate values decline in a downwards spiral.

Population variations affect the patterns of real estate growth throughout all sectors and influence trends that can continue for decades. Matthews™ researched and examined a variety of data and factors regarding trends, change, population, demographics, and job growth, ultimately ranking the top MSAs in the United States by the highest number of year over year population increases.

Let’s dive into the top MSAs in terms of population growth, and see where you need to make your next investment.

These Cities

Chuck Evans | Je f f M i l le r | Andrew Gross

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H E R E ’ S W H Y

Booming

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The largest Metropolitan area in the South and fourth largest in the United States, the Dallas-Fort Worth-Arlington MSA has one of the highest concentrations of corporate headquarters in the United States. With a central location relative to the rest of the U.S. and home to 21 of the Fortune 500 companies, the Dallas MSA is one of the best areas to own real estate in the United States. According to Ten-X, Fort Worth is the third hottest housing market in the U.S., and Dallas follows, ranking as the fourth hottest housing market in the United States.

From 2008 to 2014, California lost 1,510 companies that moved their operations from the state and Texas received 219 of those companies. Of the 219 companies, Dallas-Fort Worth received 68 of those

companies. During 2014 to 2017, Texas gained 37,552 jobs and $6.47 billion in investments with the biggest move being Toyota Motor Corporations’ relocation to Plano Texas, just 20 miles north of Dallas. This move alone is generating 4,000 jobs and $350 dollars in investments.

Texas is perceived to be more business friendly due to tax policies, but what many overlook is the corporate-friendly regulatory environment. Texas officials consistently tout the state’s more business-friendly environment, citing fewer business regulations and lower labor costs, partly because Texas is a right to work state. As a real estate owner, the state’s business-friendly environment, and affordability makes it an attractive investment

DallasFort WorthArlington

Population Growth by Average Number of People Per Year = 130,108 2016 Population Estimate = 7,233,323

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Population Growth by Average Number of People Per Year = 92,1392016 Total Population Estimate = 20,153,634

Owning an appreciating asset is a crucial component to net-leased investments, and a common goal among many STNL owners. Due to its high demand and continuously rising rents, the New York MSA finds itself appreciating at an increasing rate, much more than most markets in the nation. Its lower cap rates directly signify the reduced risk and higher residual value of owning real estate in the area.

The New York MSA is incredibly sought-after for its employment growth, adding 199,700 jobs over the 2015 to 2016 period. Education and health services saw the largest growth, increasing 3.1 percent and adding 53,000 jobs. As this market strengthens, the unemployment rates are steadily decreasing, falling from 5.1 percent to 4.6 percent between Jan 2016 and Jan 2017, further validating the increased demand for real estate investments.

Market rents in the NYC MSA are much higher than the national average, but the continued growth provides security. Incomes in this area are some of the highest per capita in the entire country, attracting premium tenants who can afford the high rents. Additionally, high vacancy creates competition among tenants as the limited supply of retail locations drive up rents.

The best opportunities in these markets can be found in proximity to new skyscrapers currently being developed. Manhattan aside, Newark and Brooklyn are currently undergoing the most development and change. These new developments provide investors the opportunity to capitalize on these areas, quickly increasing their population density. Retail in the area immediately surrounding the new developments have the highest potential for success as the areas transform through the investment, renovation, and influx of people.

New YorkNewarkJersey City

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Rarely does a city experience both a booming job market and development in the same facet as Atlanta currently is. At 3.3 percent, Atlanta is the leading MSA for new jobs added, much of which can be attributed to extensive new development. Construction is Atlanta’s largest area of job growth at six percent, followed by professional and business services from expansions and corporate relocations. Retail opportunities in Atlanta are growing quickly, and with residents spending 20 percent more cash than the national average, current tenants in retail properties are experiencing increasing store sales.

Atlanta has been able to take on the added job growth and new developments by investing in transportation services and infrastructure three times faster than the rest of the U.S. As of May 2017, employment has risen by twice the national average, and in combination with statistically better wages, the area continues to be the back bone of Georgia by adding a strong and sustainable workforce for its growing industries. Atlanta is the ninth largest MSA in the country at just under six million people and is expected to continue growing by 50 percent in the next 20 years.

Multiple sports-related developments and investments are also expected to increase the value of properties east of downtown and in northern Atlanta.

The Mercedes-Benz Stadium and SunTrust Park will house the Atlanta Falcons and Braves, respectively, when they open this Fall. The economic opportunity these stadiums produce is substantial. Being within minutes from downtown and in a densely populated area of the city, there are many opportunities to increase the rents and invest in appreciating assets in retail and quick service restaurants near the new Mercedes-Benz Stadium. Higher quality tenants will look to take advantage of the influx of both sports fans and other customers from non-sporting events at the stadium. Similarly, the SunTrust Park development is located near many national credit tenant QSRs and big box retailers, which will reap the benefits.

The Midtown area north of Downtown will see the largest population increase in the coming years with multiple high-rise apartments currently under construction. Like the stadium developments, these apartments will promote better tenants, rents, and store sales in the area. The edges of the city will see the largest growth as developments sprawl to accommodate population growth. The area has the fourth highest population growth in the country, with half of Atlanta’s population having relocated to the outer city limits since 2010.

3 AtlantaSandy Springs

RoswellPopulation Growth by Average Number of People Per Year = 80,962

2016 Total Population Estimate= 5,789,700

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South Florida is one of the hottest markets in the country right now – and we are talking about more than just the weather. Sunny beaches, golf courses, vibrant culture, and technology jobs are fueling the growth.

Numbers released by the U.S. Census Bureau show as the 4th fastest growing state in the U.S. The Miami - Fort Lauderdale - Palm Beach metropolitan area is now the eighth most populated MSA in the nation, recently surpassing six million people for the first time. These three counties have shown rapid and sustained growth over the past half-decade. Just under 500,000 new residents have been seduced by the golf courses available in the Palm Beaches, the towering condos and waterfronts of Broward County, and the bristling and colorful street life of Miami-Dade’s Little Havana and beaches.

Broward County led the growth spurt with an 8.5

percent rise the past five years and now has a population of just under 1.9 million. Miami-Dade County — the most populous county in Florida — and Palm Beach County, each grew at 7.8 percent to 2.69 million and 1.42 million, respectively.

Since 2010, Miami’s downtown population has risen 6.5 percent annually, while the entire city grew 1.8 percent, and Dade County 1.4 percent. In 2016, 63 percent of new residents moved into the city due to growth in the greater downtown areas. The cost of living in Florida is attractive as it is an income tax-free state. In addition to the tax benefits, South Florida is developing state of the art transportation systems to support population growth and fuel employment opportunities. Florida East Coast Industries (FECI) has announced plans to build a $3 billion, 235-mile express train system that will eventually connect Orlando to Miami.

MiamiFort Lauderdale

Palm Beach

4Population Growth by Average Number of People Per Year = 80,334

2016 Total Population Estimate = 6,066,387

Los AngelesLong Beach

Anaheim

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Economically speaking, Los Angeles is one of the world’s powerhouses and an international hub that makes up one of the highest populated MSAs in the United States. The Los Angeles MSA encompasses the Counties of both Los Angeles and Orange County and is home to 88 incorporated cities including the likes of Long Beach and Anaheim. Overall, the Los Angeles MSA holds a population that exceeds a staggering 13 million residents and 19 million in the greater region. Even with the growth rate of 3.75 percent, the population has increased by an astounding average of 77,888 people per year. Given the MSAs expansive population growth, robust economy, and appeal to business, the Los Angeles MSA is an investors paradise.

Considering businesses are attracted to the top-notch talent that large MSAs draw in, it is no surprise that the Los Angeles MSA houses a tremendous number of both start-ups and established companies. The City of Los Angeles alone is home to seven of this year’s Fortune 500 company headquarters. Some of the largest employers include entertainment companies such as Walt Disney, Warner Brothers and Sony Pictures, engineering giants like Northrop Grumman and Boeing, and large medical institutions such as Kaiser Permanente. Adding to the already prominent business market, Los Angeles also holds the second busiest port in the country recognized for generating more than one billion a day in economic activity.

Along with many other markets in California, Los Angeles has fostered a culture of innovation, and tech giants have expanded to create “Silicon Beach,” which houses over 500 tech start-up companies as well as some of the biggest moguls in the business – Google, Yahoo!, YouTube, Snapchat, and Facebook. The newly found start up culture retains talent, attracts new business, and creates a culture of innovation that fosters future growth and demand.

established universities in the country. University of Southern California (USC) and University of California, Los Angeles (UCLA) both boast over 40,000 in total enrollment per year. The universities appeal not only to the U.S. but international students that drive further foreign investment into the area.

Famous for its Hollywood allure, dynamic nightlife, and enchanting amusement parks, when it comes to tourism, Los Angeles is one of the most visited cities in the country. Los Angeles County alone has broken its record of visitors six years in a row. In 2016, LA County received 47.3 million tourists, up by four percent from the year prior and is expected to rise. Sustainable tourism provides steady outside investment and inflows into the area that spin the wheels on countless industries – hospitality, entertainment, and retail to name a few. The mayor of Los Angeles, Eric Garcetti attributed tourism as a primary driver that helped create more than 140,000 jobs and start 150,000 businesses since 2013 alone.

The Los Angeles MSAs diverse mix of billion dollar industries, growing population, and flourishing tourism all help to protect against downturns in the market and generational use in the case a tenant may vacate. The high-density market filled with endless attractions and opportunity makes Los Angeles a very safe investment for real estate.

Further providing a constant flow of new residents and talent to the job market, Los Angeles is home to 129 colleges, including some of the most established

Population Growth by Average Number of People Per Year = 77,888

2016 Population Estimate = 13,310,447

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6The Washington District of Columbia Metropolitan Statistical Area is made up of three major cities; Washington D.C., Arlington, and Alexandria. These are some of the most robust cities in the country when considering job security and livability. The area has experienced just under a nine percent increase in population from 2010 to 2016.

Families building a life in the D.C. MSA are seeking employment, specifically in the U.S. government, and as defense contractors or tourism providers. These jobs have good security and longevity, an aspect which makes investors feel comfortable in multifamily investments.

Therefore, investors looking for acquisitions should focus on the state’s capital. This is the “hub,” or controlling market of that entire state. Understanding that the capital of any state is the most secure, the capital of the United States of America is especially attractive.

Large companies are also looking to the Washington

D.C. MSA in hopes of relocating their headquarters. Given the overpopulation in D.C., most large companies have located to surrounding areas. The food giant, Nestle recently relocated their headquarters to the D.C. suburb, Arlington. As a result, this has affected many other companies under the Nestlé umbrella such as Häagen-Dazs, Baby Ruth, Lean Cuisine and dozens more. This move has brought over 750 new jobs to this already prolific market. The proximity of suburbs to the nation’s capital gives businesses a connection to both consumers and stakeholders in D.C.

The demographics of the D.C. area are also attractive, as most are well educated and experienced. 71 percent of Arlington residents age 25 and older have a bachelor’s degree or higher, making this a corporate recruiter’s dream. The County of Arlington launched a $700,000 public-private partnership fund last year to lure tech startups to the area in an effort to capture the younger, educated population from the top universities across the country. This tactic further enhances the population boom in the area.

WashingtonArlingtonAlexendria

Population Growth by Average Number of People Per Year = 77,5542016 Population Estimate = 6,131,977

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Phoenix is the largest city in Arizona, and combined with the surrounding metropolitan area, is often called the “Valley of the Sun.” The population increased 45.3 percent from 1990 through 2000 (compared to a national average of 13.2 percent) and has grown another 11.8 percent from 2010 to 2016. The U.S. Census Bureau estimates that by 2030 the population of Phoenix will grow to 2.2 million while the population of the metro area will reach 6.3 million, which is up from the current 4.66 million. Phoenix has consistently ranked as one of the fastest growing economies in the U.S. with a population growth of four percent per year for the past 40 years.

Unlike other large MSAs, Phoenix has affordable prices due to the inventory of parcels available for future development in the surrounding areas. There is plenty opportunity for growth and little regulation hindering development. Arizona is friendly to businesses

and has a highly skilled labor force with low operating costs and a minimal risk of natural disasters.

This MSA has focused on expansion through planned infrastructure; new freeways, light rail lines, as well as the new automated transportation system at the Sky Harbor International Airport called the PHX Sky Train. In addition to the built-out infrastructure and planned growth, Phoenix has the most solar power per capita, ranked second for annual solar installation. This surge of alternative resources makes it less expensive for property owners and families without being constrained by energy costs. Because of the ease for business owners and lack of constraints, whether it be resources or regulation, Phoenix continues to have a perfect storm for growth.

UPS, Indeed.com, and Intel Corp have announced plans in 2017 that will create nearly 12,000 new jobs in the Phoenix region. In June

alone, 222,000 jobs were created according to the U.S. Bureau of Labor Statistics. Additionally, Phoenix is home to Arizona State University- Tempe, with 75,000 students, this region takes affordability into consideration and continues to change its landscape in a positive direction.

The city is in a multifamily construction boom with no sign of slowing down. The average units delivered for new multifamily construction has already surpassed the Phoenix MSA 20-year average with 5,448 project units being delivered this year. Population increases, affordable housing, and new multifamily developments occur because of business growth and are continuing to create demand for retail, in turn providing security for real estate investment.

PhoenixMesa

ScottsdalePopulation Growth by Average Number of People Per Year = 76,087

2016 Population Estimate = 4,661,537

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The Seattle Metropolitan Statistical Area is one of the fastest growing and most highly sought-after areas in the United States. The Seattle MSA made up of Tacoma, Bellevue, and Seattle has seen significant job growth and creation over the past few years. Also, similar to Florida and Texas, Washington State is a tax-free income state, a great benefit to attracting families and those looking to boost their yearly income.

Despite being described as gloomy and wet, Seattle has experienced a three percent year over year growth rate. This rise in population is mainly due to the low cost of living. The average price to rent a one bedroom apartment is around $1,302, compared to Los Angeles which averages $1,730. The median home price in the Seattle metro area is $414,000, compared to the Bay Area which holds at $834,000. Besides low cost of living, another

factor drawing in people to the Seattle MSA is employment opportunity. In conjunction with the low cost of living and higher earning potential, Millennials and families are moving to the Seattle MSA for employment. Technology companies have had the greatest impact on employment, especially software engineers and other computer related industries. When adjusting for the cost of living, the average engineer’s salary is $180,000 compared to $134,000 in San Francisco. The dollar stretches much further in Seattle, often one and a half times more as other major metros on the west coast, such as Los Angeles and San Francisco.

Many large companies are choosing to move from Silicon Valley to Silicon Cloudy, and have set their roots in the Pacific Northwest. Amazon currently occupies over eight million square

feet of prime office space in Seattle, earning the city the title of “Biggest Company Town in America.” Alaska Airlines, which has seen a steady 4.2 percent growth from 2015 – 2016, and just acquired Virgin America also chose Seattle for their headquarters. Additionally, other giants such Starbucks, Zillow and Microsoft are all located in Seattle. Expedia recently announced their plans to spend $1.2B on a new headquarter in Seattle. The firm is looking to have the 40-acre former Amgen site up and running in 2019.

The steady influx of well-known companies can attest to the certainty and security when investing in the Seattle MSA. Given the dramatic population increase and the tax friendly environment, Seattle proves to create opportunities that provide generational wealth through real estate investment.

SeattleTacomaBellevue

8Population Growth by Average Number of People Per Year = 58,3592016 Population Estimate = 3,798,902

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According to Forbes, Austin is a rising star, as it has “become the nation’s superlative economy over the past decade.” Austin’s population growth is largely driven by a strong rate of net domestic in-migrations. Between the span of 2014 to 2016, Austin ranked the highest in the rate of net domestic in-migration out of 53 of the largest metropolitan areas in the nation at a ratio of 16.4 residents per every 1,000.

With a 19.82 percent increase in population growth from 2010 to 2016, Austin claims the title of the highest percentage growth of any of the top ten MSA’s we covered. Robert Kaplan, president of the Federal Reserve Bank of Dallas, said, “Since 2000, the average rate of population growth has been almost a full one percentage point higher in Texas than in the U.S. as a whole”. Because of the influx of people, the City of Austin has the strongest retail occupancy rate among all the major markets in the

country, sitting at 96 percent. These growth rates and numbers make sense when you dig deeper into what’s causing people to move to the area...jobs! Of all the U.S. metro areas from 2008 to 2014, Austin received the most companies fleeing California, tallying up to a total of 99 companies. Of those 99 companies that migrated to the Austin Metro, 86 are a part of the City of Austin.

What makes Texas special, and more specifically Austin, is the diversification of the economy. The educated proportion of its population between 25 and 44 years old is 43.7 percent, well ahead of the national average of 33.6 percent. Although this number is somewhat below the traditional “brain center” cities of the Northeast and the West Coast, many of the companies who have moved to Austin are tech companies. Home to over 4,700 high-tech companies, Austin is often referred to as “Silicon Hills,”

or the new Silicon Valley. Since 2000, employment in the Austin area grew 52.3 percent which is fifteen percentage points higher than Houston or Dallas-Ft. Worth, two cities that are also on our top MSA list.

All in all, Texas is one of the best states to own real estate in. The major MSA’s: Dallas Ft. Worth, Houston & Sugarland, and Austin Round Rock are people magnets and have experienced major growth in the population of the educated millennial households that are starting to have children. Unlike other top MSAs, Texas has the room to expand, the resources to do so, and the business-friendly environment to support and sustain it. Whether it’s new development in the suburbs or redevelopment of major malls, the Austin & Round Rock MSA has solidified itself as an MSA you need to own real estate in.

AustinRound Rock9

Population Growth by Average Number of People Per Year = 54,7922016 Population Estimate = 2,056,405

Chuck EvansCHUCK.EVANS@MATTHEWS.COM

(310 ) 9 19 -5841

Jeff Mil lerJEFFERY.MILLER@MATTHEWS.COM

(424 ) 220-7263

Andrew Gr o s sANDREW.GROSS@MATTHEWS.COM

(310 ) 955- 1773

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