With more and more people working from home, it may make sense to look for investment opportunities in smaller markets where businesses are relocating and expanding, population and job growth are steady, and ROIs are attractive.
In this article, we’ll look at seven of the most surprising hot commercial real estate markets with strong forecasts, still under the radar screen of most investors – at least for now.
1. Kingsport, TN
Kingsport is located in the counties of Sullivan and Hawkins in Tennessee. Both of these counties consider Kingsport as their most prominent city. As per the 2020 census, Kingsport’s population is approximately 55,442.
The economy in Kingsport, TN, is based on manufacturing chemicals, plastics, glass, paper, and printing.
- Population: 55,442
- Population growth (10 years): 2.90%
- Job growth (year over year): 1.3%
- Unemployment rate: 6.1%
- Median age: 44.5
- Per capita income: $30,275
- Median household income: $42,066
- Office: $16.40/sq. ft., 1.7% y/y increase, 4.4% vacancy
- Retail: $11.1/sq. ft., 2.6% y/y increase, 3% vacancy
- Multifamily: $801/month, 7% y/y increase, 3% vacancy
- Industrial: $4.9/sq. ft., 5.4% y/y increase, 4.8% vacancy
From our Crexi Intelligence data, some notable metrics from Kingston commercial property are a median asking price of $119 per square foot across asset classes – much lower than the national average of $165. The median number of days for lease on the market in Kingsport is 146 compared to the national median of 247 on Crexi. Crexi’s comps data also shows $38.5M transacted via multifamily properties in the past six months.
2. Fort Wayne, Indiana
According to the 2021 census, approximately 263,886 people reside in Fort Wayne, Indiana. Fort Wayne has six hospitals, 360 churches, and several colleges, such as Indiana Tech, the University of St. Francis, Brown Mackie College, and more. Top local employers include B.F. Goodrich, General Motors, Lincoln Financial Group, Frontier Communications Corp., and more.
- Population: 279,228
- Population growth (10-year): 9.86%
- Job growth (year over year): 2.7%
- Unemployment rate: 2.3%
- Median age: 30.7
- Per capita income: 27,593
- Median household income: 51,454
- Office: $16.1/sq. ft., .8% y/y increase, 7.4% vacancy
- Retail: $12.30/sq. ft., .5% y/y increase, 4.4% vacancy
- Multifamily: $853/month, 11% y/y increase, 4.5% vacancy
- Industrial: $4.6/sq. ft., 3.5% y/y increase, 5.8% vacancy
According to Crexi Intelligence data, the median sold cap rate within Fort Wayne in the past six months was a growing 7.2%. The median area of properties currently for lease on Crexi is 3,406 square feet, much larger than the national median of 2,579 square feet.
3. Oshkosh, WI
In Northeast Wisconsin, along the western shore of Lake Winnebago, you will find the historic town of Oshkosh, WI. Oshkosh is well known for the clothing company, OshKosh B’Gosh, which was founded in 1895. Oshkosh has several rivers and lakes, lively nightlife, unique attractions, and scenic outdoor dining.
- Population: 66,816
- Population growth (10-year): 1.93%
- Job growth (year over year): .4%
- Unemployment rate: 3.9%
- Median age: 33.9
- Per capita income: $25,625
- Median household income: $51,282
- Office: $17/sq. ft., .4% y/y increase, 13% vacancy
- Retail: $11.5/sq. ft., .7% y/y increase, 3.6% vacancy
- Multifamily: $747/month, 1.9% y/y increase, 2.2% vacancy
- Industrial: $4.8/sq. ft., 3.8 % y/y increase, 3.1% vacancy
According to Crexi’s data, Oshkosh boasts a housing occupancy ratio of 16:1, with multifamily typically having sub-5% asking cap rates and a 6% median sold cap rate in the past year. Across asset classes, the median asking price per square foot on Crexi is $59.
4. Rochester, NY
Rochester earned the nickname “Flour City” as it was once known as the world’s largest manufacturer of baking flour. Rochester is also known as “America’s first Boom Town” and the “Young Lion of the West” due to how quickly Rochester’s population grew along with its economy. Today, people enjoy the natural offerings Rochester has, such as exploring the Erie Canal by kayak, bike, or foot.
- Population: 211,328
- Population growth (10-year): -2.59%
- Job growth (year over year): .8%
- Unemployment rate: 9.8%
- Median age: 32
- Per capita income: $24,916
- Median household income: $37,395
- Office: $16.4/sq. ft., -.4% y/y decrease, 8.5% vacancy
- Retail: $13/sq. ft., 1.1% y/y increase, 5.1% vacancy
- Multifamily: $1,129/month, 6.7% y/y increase, 2.6% vacancy
- Industrial: $6.7/sq. ft., 6.2% y/y increase, 6.6% vacancy
Rochester has seen impressive transaction volume, according to Crexi Intelligence – with $473M transacted in 2020, $643M transacted in 2021, and $556M transacted as of H2 2022.
5. Portland, ME
The word Portland comes from the Old English word of Portlanda, meaning “land surrounding a harbor.” Named after Portland, Dorset, Portland is the largest city in Maine. Portland’s economy is heavily based on tourism, fishing, and commercial shipping.
Portland is one of the last few waterfronts still in service in the U.S. It is considered New England’s biggest tonnage seaport and the second largest fishing port. Portland’s seaport transports over 206,000 international passengers, with 41,000 cruise ship passengers.
- Population: 66,706
- Population growth (10-year): -.67%
- Job growth (year over year): 1.2%
- Unemployment rate: 2.6%
- Median age: 36.8
- Per capita income: $38,682
- Median household income: 61,695
- Office: $20/sq. ft., -.1% y/y decrease, 5.2% vacancy
- Retail: $15.5/sq. ft., 1% y/y increase, 3.3% vacancy
- Multifamily: $1,519/month, 8% y/y increase, 2.7% vacancy
- Industrial: $7.7/sq. ft., 6.2% y/y increase, 4.1% vacancy
In the last four months, $36.3M has transacted in the industrial sector alone in Portland, according to Crexi Intelligence data. Currently, there are approximately 161k square feet of industrial space in Portland for sale on Crexi.
6. New Haven, CT
The coastal city of New Haven has been home to Yale University since 1701. Yale University largely represents New Haven’s economy, but other professions include those in health care, financial services, retail trade, engineering, and more.
Founded in 1638, New Haven is known as one of the first planned cities in America. Shortly after, the “Nine Square Plan” was created by laying out eight streets in a four-by-four grid and is a National Planning Landmark. The New Haven Green is a common central block comprising 16 acres and is now a National Historic Landmark.
- Population: 130,381
- Population growth (10-year): -1.3%
- Job growth (year over year): -.4%
- Unemployment rate: 9.7%
- Median age: 30.7
- Per capita income: $27,607
- Median household income: $44,507
- Office: Average asking price per square foot is $30.88, 13.81% vacancy, -.15% y/y increase
- Retail: $15.9/sq. ft., -2.6% y/y decrease, 5.3% vacancy
- Multifamily: $1,472/month, 8.3% y/y increase, 4.2% vacancy
- Industrial: $7.8/sq. ft. 6.5% y/y increase, 4.8% vacancy
New Haven’s metrics on Crexi Intelligence report a 5% median sold cap rate so far in 2022. It’s also proving to be one of the best markets for multifamily, with sales trading at 469 properties in the past year.
7. Grand Rapids, MI
East of Lake Michigan lies the city of Grand Rapids, located on the Grand River. It is home to the Ford Presidential and Grand Rapids Public Museums, the Frederik Meijer Gardens, and several breweries. People used to know Grand Rapids as America’s Furniture Capital, but it is more recently known as “Beer City USA.”
- Population: 203, 644
- Population growth (10-year): .43%
- Job growth (year over year): 8.32%
- Unemployment rate: 3.4%
- Median age: 31.4
- Per capita income: $26,556
- Median household income: $51,333
- Office: $22.54/sq. ft., -3.22 y/y decrease, 11.83% vacancy
- Retail: $13.91/sq. ft., 4.97% y/y increase, 6.23% vacancy
- Multifamily: $1,347/month, 4.76 y/y increase, 3.3% vacancy
- Industrial: $5.29/sq. ft., 4.97% y/y increase, 2.83% vacancy
Crexi’s Intelligence data shows notable metrics of industrial space listed at a median of $54 per square foot in the past year. Grand Rapids seems to attract investor attention when they’re looking where to buy industrial property, with transaction volume totaling $42.6M in 2021 and already having hit $32.1M in the first half of 2022.
The Bottom Line
The strong CRE markets mentioned are all located in the midwestern and northeastern parts of the United States. All have unique industries that help contribute to their strong market conditions. Vacancy rates are low, average rents continue to rise, and asking prices per square foot have increased significantly yearly. Overall, these cities provide solid opportunities for commercial real estate investing.