With a nod to Mark Twain, the death of the Sunbelt economy and job market have been grossly exaggerated. Over the last decade, many cities in the Sun Belt have seen tremendous growth in jobs and population. Millennials have been moving south in droves chasing better job prospects and warmer weather. Cities like Raleigh, NC, Austin, TX and Nashville, TN have been booming. With demographic shifts came a boom in investment and a cyclical peak that saw overinvestment and crazy price moves. Needless to say, there are definite pockets where the animal spirits took over for otherwise rational investors. Furthermore, much of the technology focused job growth has taken a hit over the last 6 months, so a cyclical decline is a very clear possibility for these markets. That said, this is not the end of these markets as engines for economic growth.
While technology job growth may slow for the short term, warm weather markets continue to drive service and tourism jobs. Orlando, Nashville, Las Vegas and New Orleans are some of the hottest job markets in the country. Part of this is a recovery from the pandemic collapse, but investment in these cities has meant new infrastructure and investors in that infrastructure continue to hire to try and recoup their investments. While we do expect cyclical pressures in these cities, we believe in the south. It may take a few years to recover to a normalized pace of growth, but the Sunbelt has some structural advantages. Workers are generally cheaper, the cities themselves, because of their appeal to the younger demographic have been forced to build fun places to hang out. Building a “vibe” is a bit of a virtuous cycle. Build cool stuff, attract cool people, build more cool stuff. The process of upgrading these cities began at the end of the GFC. As that process played out it became more attractive for educated people to go south to search for better jobs, affordability AND “vibe”. The south is very much alive, even if the growth slows for a bit.