It’s a great time to be secondary
By: J. David Chapman/October 29, 2020
What’s a secondary market? There are no strict boundaries delimiting which cities qualify as secondary markets versus primary or tertiary ones; however, secondary markets are generally midsized cities that have begun to experience growth and have been successful at attracting amenities capturing people’s attention.
The pandemic and civil unrest might accelerate a trend we’ve been watching for a few years. We are seeing steady growth in the economies of these secondary cities with new jobs and businesses opening, expanding, and in many cases an emerging tech and medical sector leading the way. The quality of life is increasing the population of the growth with young, educated professionals and families moving to town.
Secondary markets’ housing is gaining steady strength, but remains less competitive than primary markets, resulting in lower prices for homebuyers and higher returns for investors. In the rental market, occupancy rates are beginning to rise; but because the supply of apartments is relatively unconstrained, rent prices are staying affordable for most residents. Bottom line, secondary housing, on average, is 45% more affordable than in primary markets.
Polls are showing the civil unrest and unbridled crime recently seen in large, primary cities has caused many to reconsider their lifestyle in those cities and consider moves to smaller, secondary cities. Secondary cities have become more walkable, with more transit-oriented developments and recruiting major-league athletics and forming arts communities. These quality-of-life changes are keys to making secondary cities more attractive to those currently living in larger, primary cities.
Research shows that secondary cities are getting ready to enter a very advantageous time as companies join individuals and families in consideration of leaving certain states (California) and large, primary cities. PwC and the Urban Land Institute calculate and report costs of doing business in secondary markets 16% less than in those primary markets. Real estate costs are 38% lower, energy costs are 22% lower, and labor costs are 14% lower than in primary markets.
This is good news for Oklahoma. We could be entering a time when our two largest metropolitan markets are actually in the “sweet spot” when it comes to size and available amenities. I predict both Oklahoma City and Tulsa will be considered for corporate relocations and certainly for families looking for quality of life. Welcome to Oklahoma!
J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).