Will tier 2 markets overtake tier 1 markets?

Question

Ok, to be clear I don't think we are looking at the end of large metropolis cities. I do wonder, however, if now that folks can work more easily virtually, whether the circle around large cities like Seattle, Boston, Philadelphia, or San Francisco may widen out to include tier 2 (50-100k population) or even tier 3 (20-50k) cities. I have been traveling to some of these cities and have been really surprised how livable many of these cities are. Cities like Harrisburg, or Lancaster, PA are great examples with very high standards of living and much cheaper housing prices than you will find in Philadelphia or DC. I find as a 30 something year old these cities have many of the things that I am looking for like cool coffee shops, accessible nature, walkability and really cool housing stock.

So, my question to fellow BP'ers: What do you think of this thesis? I am interested in critical feedback as well as recommendations for some of these cities to visit. I am nearly finished with my camper build out and am ready to hit the road. Thank you all for your feedback.

So, my question to fellow BP'ers: What do you think of this thesis? I am interested in critical feedback as well as recommendations for some of these cities to visit. I am nearly finished with my camper build out and am ready to hit the road. Thank you all for your feedback.

Justin Thorpe · Answer

@Sebastian E.

I can speak for SF. In theory yes and in the short term yes, the biggest gainers from remote working trends will be outlying areas like Santa Cruz, Napa etc versus out of state location s like Montana or Idaho etc.

But I also think once Covid talk dissipates office culture will take over and old habits WILL return.

Plus not everyone can avail these areas. I know of couples where 1 of that spouses can work remotely and the other cannot.

So by default they have to stay close to work. Coffee shops and cute downtowns are nice but theses towns may not have great schools for kids etc. My point is, it’s not an easy lift and shift for most people.

Also tech is a very dynamic area to work in and many people need to constantly compete to get and stay ahead which also means changing employers and it’s quite possibly the new employers may not support remote work.

Mike Bolen · Answer

I agree with @Justin Thorpe I think folks will go back to previous work styles. There are synergistic enhancements to a workflow that can only be performed when a group is working together in an office. While Zoom is OK it's not a replacement. I actually see more of a job elimination potential for anyone who does work from home. If you can work from home why not get a foreign-educated and foreign-based employee who will perform the same job for a fraction of the cost?

Jason Muth · Answer

@Sebastian E. I am in Boston. Live right in Southie next to the Seaport, two of the hottest neighborhoods for 25-45 year olds. Been here for almost twenty years. The draws for living here involve being around others in the same cohort and proximity to tech/finance jobs.

I’m thinking WFH has worn thin in terms of novelty. With the nicer weather, tons of people are out and about now - just not in the bars and restaurants, but rather outdoors in public spots. Connecting with others is critical for human nature. We are going to see adjustments with how people work, but not systemic shifts to WFH. I see flex schedules with a hybrid model of office/WFH becoming more popular. There will be an exodus to some suburbs that have pulses/community, but not at the complete downfall of the city.

We are looking at places like Salem, Portsmouth NH, Newburyport, and Lowell and areas that should stand to benefit. All cities unto themselves, none boring suburbs with similar homes with large yards where everyone drives everywhere. 30-35 year olds make up the largest range of first time homeowners in Greater Boston, many of them are still single or newly married without kids yet, and they still want to be near their friends with active lifestyles.

Will tier 2 markets overtake tier 1 markets?

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