Why This Matters Now
The real estate landscape in the United States is shifting. While the spotlight often stays on major metropolitan markets such as New York, Los Angeles, Miami, and Washington DC, the most meaningful growth story of 2025 is happening outside these well known hubs. Secondary cities have emerged as quiet engines of population growth, economic resilience, and housing demand.
Rising living costs in coastal metros, lifestyle shifts, the spread of remote and hybrid work, and structural changes in local economies are pushing households and investors toward markets that offer a stronger balance of affordability, quality of life, and opportunity.
Secondary markets are no longer “alternative” choices. They are shaping the next chapter of American real estate.
Data Snapshot
Multiple 2024 and 2025 analyses confirm the strength of midsized markets. According to the Brookings Metro Monitor, secondary regions outperformed many large metros in affordability, employment recovery, and overall population stability.
Source: Brookings Metro Monitor 2025 Growth and Affordability Trends
https://www.brookings.edu/articles/metro-monitor-2025-growth-and-affordability-trends/
The CBRE United States Real Estate Market Outlook also highlights that investment flows are steadily increasing toward high yield, lower volatility markets across the Midwest, South, and Mountain West.
Source: CBRE United States Real Estate Market Outlook 2024
https://www.cbre.com/insights/books/us-real-estate-market-outlook-2024
Remote work trends further support this growth pattern. Research published by the Volcker Alliance shows that the shift in workplace flexibility has permanently altered household location preferences, making midsized cities much more competitive.
Source: Volcker Alliance Remote Work Study
https://www.volckeralliance.org/sites/default/files/2023-01/Real%20Estate%20Economics%20-%202022%20-%20Van%20Nieuwerburgh%20-%20The%20remote%20work%20revolution%20%20Impact%20on%20real%20estate%20values%20and%20the%20urban.pdf
Innovation focused research by JLL adds that many emerging tech, science, and logistics hubs are no longer concentrated in the largest metros but are now widely distributed across secondary markets with talent clusters and affordability advantages.
Source: JLL Innovation Geographies
https://www.jll.com/en-us/insights/innovation-geographies
Finally, household relocation patterns in the Zillow Mover Report underscore the nationwide preference shift toward midsized regions that combine affordability with lifestyle value.
Source: Zillow Mover Report
https://www.zillowgroup.com/news/mover-report/
Population and Migration Trends
Population trends form the foundation of long term housing demand, and the past three years have revealed one of the most significant demographic shifts in decades. Secondary cities are attracting new residents at a pace that rivals or exceeds many large metros.
This movement is driven by several factors:
- The search for affordable homeownership
- Hybrid and remote work flexibility
- Desire for more space
- Stronger cost of living advantages
- Family oriented migration patterns
Cities such as Raleigh, Tampa, Boise, Madison, Columbus, Spokane, and Kansas City are among the top beneficiaries. These markets maintain strong educational institutions, diversified employment, and a livable environment that appeals to younger households.
The migration is not temporary. It reflects structural changes in housing affordability and lifestyle preferences.
Economic and Affordability Indicators
Secondary cities provide more balance between wages, cost of living, and housing costs than major metros that have become increasingly out of reach for middle income households.
Affordability is the primary driver. The ratio of median home price to median household income remains significantly healthier in secondary markets. Rent to income ratios are also more sustainable, allowing renters to save and eventually transition into homeownership.
Additionally, many secondary cities have:
- Growing local economies
- Diverse employment clusters
- Large university anchored ecosystems
- Strong health care and service sectors
- Expanding logistics and industrial networks
The Brookings Metro Monitor highlights that many secondary regions outperformed the largest metros in overall economic resilience following the pandemic disruptions. This resilience has made these markets more attractive to both residents and investors.
Investment Flows Into Secondary Markets
Real estate investors are shifting their strategies toward markets where yields are stronger and valuations remain reasonable. According to CBRE, a growing share of institutional capital is flowing into secondary cities due to higher income returns, predictable demand, and rising liquidity.
Investors are particularly focused on:
- Workforce housing
- Small to mid tier multifamily
- Single family rental portfolios
- Light industrial
- Community oriented retail
- Last mile logistics
- Mixed use developments near transit or universities
Secondary markets also offer more favorable acquisition pricing and less competition compared to major metros where institutional buyers often drive pricing volatility.
Why Secondary Cities Now
Valuation Advantages and Yield Pickup
The spread between cap rates in primary and secondary markets has widened, making secondary markets attractive for both private and institutional investors. Investors can acquire assets at lower cost bases, achieve stronger yields, and face lower entry risk.
End User Demand and Affordability Tailwinds
Residential demand in secondary cities is powered by households that prioritize affordability, community, and lifestyle. Remote work, flexible schedules, and rising home prices in major metros have pushed many working families toward markets where everyday expenses are manageable and homeownership is achievable.
Local Economic Resilience
Secondary markets benefit from balanced, diversified economies. Many of these regions have strong local universities, hospitals, logistics hubs, government anchors, or manufacturing clusters. The JLL Innovation Geographies analysis highlights the rise of emerging tech and innovation hubs in smaller cities with strong talent pipelines and cost advantages.
These fundamentals provide a solid foundation for long term stability.
A Pragmatic Six Step Checklist for Evaluating a Secondary City Investment
1. Demographic Momentum
Look for cities with consistent population growth, not short term spikes. Strong secondary markets show:
- Steady net migration
- Growth in working age residents
- High university retention
- International student inflow
- Expanding suburban peripheries
These factors signal long term housing demand.
2. Affordability Gradient
A market’s affordability gradient measures how accessible it is for both owners and renters. A favorable gradient typically includes:
- Low price to income ratios
- Reasonable rent to income ratios
- Sufficient construction capacity
- Predictable long term appreciation potential
The affordability advantage is one of the biggest differentiators between secondary and primary markets.
3. Employment Base Quality
A healthy secondary city economy is typically diversified. Strong markets often feature:
- Medical and research centers
- University anchored employment
- Logistics and transport corridors
- Technology and engineering clusters
- Government or military presence
Diverse employment helps reduce volatility and maintain consistent tenant demand.
4. Supply Pipeline
Evaluate both the current inventory and the near term construction pipeline. Secondary cities can absorb moderate new supply, but excessive speculative building can create temporary softness. The goal is a balanced supply environment.
5. Investor Activity and Liquidity
Liquidity matters. Markets with rising investor activity tend to offer more stable transaction volume and better pricing visibility. Look for:
- Consistent multifamily transactions
- Active local developers
- Presence of institutional buyers
- Positive absorption rates
Strong liquidity today suggests a healthier exit environment later.
6. Regulatory and Cost Environment
Secondary cities with balanced regulation and predictable tax structures tend to perform better long term. Review:
- Property tax levels
- Development incentives
- Local rent policies
- Planning and zoning flexibility
- Overall cost of doing business
Cost efficiency and regulatory clarity support strong investor confidence.
Types of Deals That Work in Secondary Cities
Value Add Multifamily
Many secondary markets contain older Class B and Class C properties with significant repositioning potential. Demand for upgraded workforce housing is high, especially near hospitals, universities, and transit corridors.
Single Family Rental Portfolios
Build to rent communities and scattered site portfolios are growing as young families seek more space. Secondary cities offer favorable rent to price ratios that support long term cash flow.
Light Industrial and Logistics
With the continued growth of e commerce and regional distribution, smaller industrial assets in secondary cities have become highly desirable. These properties offer stable tenants and long term durability.
Managed Living and Affordable Housing
Affordable housing, co living, and managed residential models address the growing workforce demand in secondary markets. These assets often qualify for attractive financing and government incentives.
Conclusion
Secondary cities are no longer overshadowed by the country’s major metropolitan areas. They have become central to the future of American real estate growth. Their combination of affordability, economic resilience, livability, and steady migration makes them attractive across all segments of the housing ecosystem.
For investors, these markets offer meaningful yield advantages and stable demand. For households, they provide achievable homeownership and better lifestyle trade offs. For developers and policymakers, secondary cities represent the next frontier in balanced, sustainable real estate expansion.
The transformation is underway, and the markets leading the next decade of growth will not be found only in the largest metros. They will be found beyond them.
