Originally published in Connect Commercial Real Estate
The Burgeoning Outpost Economy Drives Demand to Smaller Cities
Among the effects of the shift away from the traditional office environment has been the advent of what investment management firm Graceada Partners calls “the outpost economy.” As defined in a new report, this term signifies the rise of a more dispersed economy and employment base away from major cities to smaller cities with high quality of life that draws workers who have become untethered from their physical place of work in major cities.
“We spend our days immersed in commercial real estate and this new trend we had never witnessed before — the outpost economy — became increasingly clear to us,” said Ryan Swehla, co-CEO of Graceada. “The more we look into it, the more we realize the realignment taking place as secondary markets become outpost economies. As many white-collar workers have the freedom to move anywhere with their work, we are seeing a migration and demographic shift with sweeping implications across secondary markets and the entire U.S. economy.”
The report states, “Companies from Twitter to Nielsen to Facebook to Nationwide Insurance have announced indefinite plans for remote work. Countless others are giving employees months to continue to work remotely. This has provided people who have been thinking about moving from major metropolitan areas the opportunity of a lifetime — they can pack up and move elsewhere and, in many cases, keep their current position.”
With large numbers of employees therefore not tied to working at assigned desks in gateway cities’ CBDs, secondary markets with high quality of life—e.g., Sacramento, Austin and Charlotte—will experience continued population growth along with increased investment from companies embracing those regional economies.
Graceada says employers observing these trends taking place will establish outposts in these secondary markets for clusters of employees to have a home base.
“Contrary to popular speculation, we don’t think office demand will fall as a result of this shift,” noted Joe Muratore, Graceada’s other co-CEO. “A lot will depend on the location of the real estate, but the value of commercial properties increasing in these outpost cities will outweigh the short-term devaluation of downtown high-rises found in cities like New York and Chicago.”
Additionally, the report projects that traditionally working-class cities such as St. Louis and Buffalo may experience a similar focal point of attraction, creating outpost economies of their own and revitalizing a pool of American cities. However, this will depend on the quality-of-life amenities that are drawing the untethered worker.