COVID’S Boomtowns: How the Pandemic has Redefined the Way People Live and Reshaped Many of America’s Cities in the Process

Written By Joel Stinnett  –  Reporter, Nashville Business Journal March 2022


It took Daryl Deke nearly 10 years, thousands of referrals and $275 million of assets under management to build his investment firm into a California success story.

It took one virus for him to pack it up and move across the country.

“Covid-19 allowed me to move to Nashville,” said Deke, whose New Market Wealth Management firm was bought by Captrust Financial Advisors as part of the move. “Two years ago, I would have had to get on a plane or drive to a client’s office for a meeting. There’s no way they would have been comfortable doing business on Zoom. That’s all changed.”

Change has been the one constant for businesses since the pandemic took hold in the U.S. two years ago this month. Although life since then has sometimes seemed on pause, business and innovation have only ramped up.

Industries have adopted new technologies to operate in a remote world, thousands of laid-off employees have become overnight entrepreneurs, and Midwestern and Southeastern towns in particular have surged with new residents at the expense of traditionally bigger — and wealthier —coastal giants.

The rise of remote work has enabled employees to do their jobs thousands of miles away from their bosses, allowing some high-income workers to move to more affordable locales. In New York City, residents fled to the nearby suburbs, such as New Haven, Connecticut. More flew south to warmer areas such as Miami. In Los Angeles, thousands of people left California’s beaches for Phoenix’s sandy desert.

Small Business Administration lending during the pandemic

The top 15 recipients of SBA 7(a) and 504 program lending dollars between March 2020 and September 2021, by city

These disruptive ingredients are creating a new generation of boomtowns, while leaving other markets on the verge of a bust. Metros such as Las Vegas, Raleigh, North Carolina, and Orlando, Florida, have continued to see their populations grow, even as the pandemic suffocated travel and business. Others, including Baltimore, Detroit and Cleveland, are experiencing a migration away from their once bustling borders.

Like world wars and economic depressions of the past, pressures created by the global Covid crisis could affect which industries — and which cities — dominate the next decades of life in America.

“[T]here’s opportunities we’ve never seen before, but it’s not like everyone’s going to automatically be a winner,” Richard Florida, a noted urbanist, said in a recent interview with The Business Journals“The winners are going to be the ones that are really strategic and intentional, identifying those industries, those clusters, those talent bases, the ways to make their quality of life or quality of place better to attract talent.

“And yeah,” he continued, “in a way it’s a better competition, but it’s a tougher competition.”

The business of moving

Adriana Cruz’s office phone wouldn’t stop ringing.

The U.S. was barely a month into the pandemic. While many states were sheltering in place, Texas was beginning to reopen.

Gov. Greg Abbott allowed retailers to open under a to-go model and established a “strike force” of medical experts and community leaders to advise him on how to open the rest of the state.

For Cruz, Texas’ executive director of economic development and tourism, the moves proved more popular than fried Oreos at the RodeoHouston.

“We’ve seen the increase in the level of interest in Texas from a business perspective really take off after March 2020,” Cruz said. “At the beginning of the pandemic, what we were hearing from companies, they were calling our office and saying: ‘My state is shut down. I’m questioning why I’m located where I am. I can’t operate.’ And, of course, we were welcoming them to Texas.”

A record number of businesses started in Texas in 2021, with more than 1,100 expansions or relocations to the state, creating $68 billion in capital investment and more than 60,700 jobs. Texas also snagged 78 corporate headquarters relocations, including Tesla Inc. and NRG Energy Inc.

Texas tops a long list of Southern states that have seen population increases in the past two years, with individuals and companies drawn by low taxes, a high quality of life and the new freedom of remote work.

Other regions including Phoenix, Nashville, Tennessee, and Charlotte, North Carolina, also have seen their populations grow during the pandemic, often at the expense of large metros like San Francisco and New York City. For example, Austin, Texas’ population grew 3% from July 2019 to July 2020, according to U.S. Census Bureau data, whereas San Francisco’s declined by -0.57%.

However, migration from big cities is nothing new, said Brookings Institution Senior Fellow William Frey, a demographer focused on migration, immigration and urban demographics. What is new is the decline of immigration into the U.S. — and therefore into big cities, where immigrants typically first settle — because of policies enacted at the beginning of the pandemic.

Frey said estimates show a net U.S. migration of 256,000 people from 2020 to 2021, down from more than 1 million a year during the previous decade.

The pandemic has been less a reshuffling of the U.S. population and more an acceleration of long-term trends, he said.

“There has been much more movement out of places like California, New York, Illinois, and I think some of it has had to do with the pandemic — safety concerns, people deciding they could live away from work or maybe retiring early,” Frey said. “But [the pandemic] has more or less just magnified things that were going on before. I think we’ll get back to where we were before, but it still will mean that there is growth in the Southeast.”

Stimulating real estate

Empty skyscrapers. Abandoned offices. Foreclosed homes.

The potential catastrophic consequences of the pandemic on local real estate markets were easy to imagine in the spring of 2020, as businesses sent workers home.

But for many areas, potential busts turned into very real booms.

“When the pandemic hit, demand in all of the sectors just dropped off,” CBRE Global Chief Economist Richard Barkham said. “We had expected quite a big hit to demand. We had expected vacancy rates to rise, but because of the government stimulus, because the vaccines came along, the real severe hit to real estate was confined to one quarter. … When the stimulus came in, it was quite clear that, after one quarter, demand was picking up again, and economic growth was picking up.”

That rebound has extended from commercial real estate to U.S. home prices.

From December 2020 to December 2021, home values nationally jumped by 19.6%, but most large metros outpaced that, according to an analysis of Zillow Group Inc. data.

Since March 2020, 13 of the largest 200 markets have seen home values increase by more than 30%, led by Austin and Phoenix and followed by a number of Southeast cities.

Commercial real estate has mirrored that trend, with U.S. real estate transactions crossing the $250 billion mark in 2021 for the first time, according to CBRE research. Prepandemic, that annual number was hovering around $160 billion.

Those record-breaking figures suggest that real estate demand has returned in a big way, erasing fears of empty downtowns and neighborhoods filled with foreclosures. However, demand is not spread evenly.

Barkham said retail, hotel, industrial and office real estate are recovering at different rates, which he said also holds true for regions of the country.

“Recovery investment has very differently favored the Sun Belt cities over 2021,” Barkham said. “We see [investment] moving to the reopening of big coastal cities such as New York, San Francisco and San Jose in 2022, but investors were really focused on apartment and industrial [real estate] and the Sun Belt cities [in 2021.]”

Funding the future

If 2020 was the year of PPP, 2021 was the year of the VC.

Venture capital gave a breakthrough injection of cash to growing companies last year, closing more than 14,000 deals worth more than $300 billion, according to PitchBook Inc. That dollar amount is more than double the amount of investment the year before the pandemic.

Traditional high rollers such as San Francisco ($93.1 billion) and New York City ($51.9 billion) led the way, but up-and-coming startup hubs such as Raleigh ($1.6 billion), Columbus, Ohio, ($1.5 billion,) Portland, Oregon, ($1.3 billion), Minneapolis ($1.3 billion) and Durham, North Carolina ($1.2 billion) also made big splashes.

Billion-dollar investments like those are typically a precursor to explosive growth and could signal which markets are primed for postpandemic success. However, those big investments don’t always trickle into the pockets of workers in those cities.

Gus Faucher, chief economist at The PNC National Financial Services Group, said the pandemic has created a workforce shortage, forcing businesses to invest in equipment and technology instead of hiring. Investment in equipment rose 5% since the pandemic started, according to Deloitte Insights.

“If you want to increase output but you can’t find the labor, you can invest in ways that make your existing workers more productive,” Faucher said. “That’s been an area where we’ve seen strong growth, but it hasn’t been more pronounced in some parts of the country than others; I think everywhere is experiencing labor shortages right now.”

As for Deke, the newly relocated financial adviser, his investment in Nashville is paying off, for him and his family.

“It worked out phenomenally well for our firm, to be able to relocate to Nashville because of the people,” Deke said. “I was in Atlanta in the mid-1980s, and Atlanta was exploding with growth. Frankly, that’s what Nashville feels like to me: Nashville is exploding with opportunity.”

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