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Trend Reversal - 2018 may be the year of companies looking to move back into the suburbs. This is due to rising rent in downtown areas, and millennials being forced to move to the suburbs where rent is affordable. What types of businesses would benefit from moving back to the suburbs? If businesses start leaving, will this affect commercial prices downtown? Is this happening in specific areas of the country more than others? What else is attractive to companies about moving to the suburbs?

The suburbs have never held the glamour and excitement of big cities, especially for young people. But new research shows that millennials are now giving the suburbs a second look, making suburbia a prime business location in 2018.

Despite speculation that the death of the suburbs was at hand, towns large and small could see a resurgence in the coming decade. In the post-Recession years, city rents dropped, making urban office space attainable for a wide range of companies and consumers. However, rates are on the rise again, pushing the costs of city life even higher and making suburban office operations look all the more appealing.

As Millennials Mature, Suburbs Hold Greater Allure

Suburban growth is on the rise and it's been most significant in suburbs outside of metropolitan areas in the South and West, such as those near San Antonio and Atlanta. But the trend holds national implications, especially as millennials see the benefits of suburban living in a new light. With national unemployment rates falling and young professionals gaining more earning power, they're finally able to afford the amenities that many economists assumed millennials eschewed. Rather than bucking tradition, it turns out young people desired a nice house and car as much as other generations. They simply couldn't afford them — until now.

It's not just the numbers that make sense. Millennials, who now comprise one of the largest demographics in the workforce, are not content to trade their quality of life for the promise of a large paycheck. People increasingly demand a work-life balance and a healthy living environment. As the oldest millennials become parents and homeowners for the first time, they're drawn to jobs in places that boast good schools, well-maintained parks and recreation spaces, favorable safety statistics and a broad range of family-friendly entertainment. Oftentimes, the suburbs offer these amenities at far more affordable prices than big cities do.

However, young professionals who have grown accustomed to city life won't be content to trade the excitement and cultural vibrancy of, say, New York City for life in a dead-end town. Millennials might be amenable to the suburbs, but they still have high standards for the places in which they live. That's why some companies are taking an "if you built it, they will come" approach to suburban development, and investing in multi-use buildings that provide workers with attractive amenities that make the suburbs more appealing.

Businesses in some of the country's most expensive markets, such as Dallas and Washington, D.C., have already moved their operations to nearby suburbs and begun developing the types of environments talented workers crave. The lower costs and greater available space in the suburbs allow for rich ecosystems to grow at a fraction of the expense as in large urban centers.

2018: The Year of Urb-Suburbia

Development that leverages suburban prices to offer urban amenities is called "urb-suburban," and the trend has boosted the profile of areas such as New Jersey's Hudson River Waterfront and Santa Monica, California. Rather than operate in costly New York City or Los Angeles, companies are opting to provide the best of both worlds to their employees. Affordable housing prices combined with vibrant restaurant and recreation scenes plus proximity to bustling urban areas is an offer many people can't resist, especially as their focus expands from work and socialization to include homeownership and raising a family.

Although claims that American suburbs are dying en masse may be overblown, many are in decline. The "urb-suburban" approach is a way to revive them, especially for companies willing to create the kinds of attractive living environments their employees' demand. By snapping up inexpensive real estate and renovating old buildings into multi-faceted office communities, fitness centers, entertainment venues and affordable yet attractive housing, they position themselves to increase their profits and expand the talent pools to which they have access. Those that can afford to offer transportation options — such as free company shuttles or subsidized car services — further ease the transition for people who are used to relying on public transportation or biking for their daily commutes.

The rise of knowledge works in areas such as software development and other tech disciplines contributed to the urban revival in recent years. The best jobs were in big cities and talented professionals wanted to be near the center of the action. However, tech hubs are now springing up across the country, including in suburb-heavy areas like the Midwest. This creates even more opportunities for companies willing to invest outside of urban centers for long-term growth.

The suburbs may never be as chic as their urban counterparts, but forward-thinking companies can give them a run for their money. To discuss this topic, or our economic cycle, call your commercial real estate lender, or connect with one here.