US Markets to Consider (and a few to avoid)

July 9, 2015

in Plan Your Expansion

Authored by Mika Nagashima

US Markets to Consider (and a few to avoid)

If your company is in the planning stages for US expansion, you must first consider the core of the American mantra for business success – location, location, location!

As the nation moves past recession and into positive recovery, many US markets have seen a resurgent demand for space to house offices and product. Therefore, property owners are now in an advantageous position, putting tenants in a potentially disadvantageous spot as office and warehouse availability will wane in the coming years, leading to rising rents and less-than-ideal options for new businesses looking to expand.

According to CBRE, the world’s largest commercial real estate group, 48 of the 54 national markets recorded positive net absorption of office space in 2014, led by markets with a wealth of technology jobs.

The markets ranked by CBRE as having the least favorable conditions for tenants, due to factors such as increasing occupancy, strong leasing activity, increasing rents, or limited availability, include:

  • Denver
  • New York City
  • San Francisco
  • Houston
  • Seattle
  • Atlanta
  • Boston
  • Chicago
  • Philadelphia

By 2016, CBRE expects 10 of the 14 major urban markets, and eight of the 13 major suburban markets will see rent increases.

Markets ranked as most favorable for tenants, because of such factors moving against the expected tide, include Dallas/Ft. Worth, Washington, D.C. and Los Angeles.

Moving outside city walls

Forbes’ annual list of most profitable markets hasn’t varied much in recent years, and with good reason. Many companies, both large and small, have moved out of major urban centers and are finding success in what were once considered secondary markets.

Utah has seen tremendous boosts in job growth in recent years, thanks to a boon of technology companies moving operations to the region. With low energy costs, a growing state economy, and a climate welcoming of new business, Utah has become a target for established companies and startups alike.

Companies like Ebay, Adobe and Oracle might seem like obvious, big-name tenants in the Beehive State, but it should be noted that few states receive more venture capital funding than Utah, rendering it a hotbed for technology startups.

Technology and finance companies have continued to migrate to North Carolina throughout the past decade – most notably to the centrally located Raleigh-Durham region. The area’s low labor costs and high net migration over the past five years has made it a desirable place to open shop, with a wealth of talent looking for new business opportunities.

Conversely, the nation’s most populous state, New Jersey, continues to fall out of favor with new businesses. Employment growth has been sixth slowest in the U.S. over the last five years and is forecasted to be fifth worst in the next few years. Likewise, its business costs are third worst in the U.S., with no signs of improvement, according to Forbes.

Though New Jersey’s proximity to several major urban centers would seemingly position it as a highly desirable location for a new business to enter an established marketplace, recent data continues to show an increasing gap in costs vs. benefits.

Additional data shows much of New England – particularly Massachusetts, Connecticut and Maine – suffer from the same high costs and poor regulatory environments, furthering our point about considering secondary markets.

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