The Sun Belt is poised for the strongest residential real estate growth in the United States, according to the 2024 Emerging Trends in Real Estate report, released jointly by PwC and the Urban Land Institute every year.

Based on thousands of surveys and hundreds of personal interviews, the annual report provides an in-depth real estate outlook for the U.S. and Canada. And this year, several cities stuck out as hotbeds for development.

Citing their demonstrated interest in urban growth, the report named 10 top markets to watch as we enter 2024:

1. Nashville
2. Phoenix
3. Dallas/Fort Worth
4. Atlanta
5. Austin
6. San Diego
7. Boston
8. San Antonio
9. Raleigh/Durham
10. Seattle

While Chicago as a whole did not crack the top 10, there are hot spots locally as well. A recent Mainstreet Organization of REALTORS® report showed home sales more than doubling year over year in Park Forest and Niles and nearly doubling in Oswego, Brookfield and Westmont. 

Some pockets of the city have answered the call to repurpose high-vacancy office buildings or demolish them and rebuild on the same land.

Chicago is planning LaSalle Street Reimagined, a program which aims to diversify an area that’s currently 85% office space. That includes the conversion of five downtown office buildings to create more than 1,000 apartments. At least 30% of those apartments would be designated as affordable housing.

“It’s clear that the real estate industry is entering a new era of thinking, building and operating. The emergence of hybrid-work models, the strength of the retail sector and the growth of Sun Belt markets underscore the new reality on the ground, specifically in our top cities — Nashville, Phoenix, Dallas/Fort Worth, Atlanta and Austin,” Anita Kramer, senior vice president of ULI’s Center for Real Estate Economics and Capital Markets, said in a press release accompanying the report.

However, Kramer noted that this year’s data shows slightly lower ratings across the board when it comes to development and investment prospects, which reflects “a certain degree of caution.” She also noted that ratings among top cities are tighter, “indicating a sense that there is less difference among market prospects than has been the case.”

In fact, the theme of this year’s report is “The Great Reset,” reflecting how the industry can no longer rely on past benchmarks to determine the future of the market.

One such example is hybrid work, which the report says is here to stay. John Burns Research & Consulting estimates that the suburbs captured 87% of net growth between 2015 to 2022, 5% more than 2015 to 2019, as remote and hybrid workers shift out of big cities and forgo the typical office. Since 2021, U.S. home prices have risen by double-digit percentages in some of the most popular suburbs of Tampa, Phoenix and Atlanta.

Meanwhile, some fully remote workers are making even bigger moves — often to warmer environments. “COVID migrants have added even more fuel to the interregional migration to the Sun Belt that started well before,” the report says, solidifying overall interest in those Southern states.

This is especially notable when you consider that, prior to the pandemic, remote workers were actually less likely to move than other workers because they had less incentive. Their work arrangements were already in place. But newly remote workers suddenly found themselves with more freedom and new options. And the composition of those moving workers also changed.

In general, the movers are more affluent, according to census data, and skew younger. A Fannie Mae survey found that 15% of remote workers between ages 18 to 34 are “willing to relocate to a new metropolitan or regional area.” By contrast, just 8% of remote workers aged 35 to 44 are willing to move regions.

Looking ahead, these migration patterns indicate a major market impact: More homes will be needed in suburbs and smaller cities. Employees will need retail closer to their homes, rather than near downtown offices. People will consider buying and renting larger homes so they can work there comfortably. And, naturally, the need for office buildings will decline.

Compared to Q4 of 2019, during Q2 2023, pre-pandemic, downtown office vacancies are up 73% and suburban office vacancies are up 32%. In turn, office buildings have lost their appeal to investors, with sales of those buildings declining more than twice as much as other property types.