Emerging real estate markets provide investors with plenty of potential for growth, but understanding how to identify these markets is key. Fortunately, there are several factors investors can use to determine which areas are likely to show growth potential in the future. We’ll take a closer look at each of these factors and how they contribute to an emerging market’s possible future success.
An emerging real estate market is typically considered to be a market with a population of less than 1 million people, although this can depend on the area and how close it is to another major metropolitan area. Emerging markets are also sometimes referred to as tertiary markets, and they demonstrate potential for growth in both development and investment revenue. Fort Worth, Texas fits into this category, so we’ll use it as a case study to demonstrate how investors can identify emerging markets with growth potential.
Changes in the demographics of an area can be a key indicator of an area’s readiness for growth. Influxes of young families, working professionals, or retirees looking for desirable housing can have a positive impact on the local real estate market. They can drive demand for new apartments and may even be able to afford higher rents, and increases in population may also lead to job creation to help the local economy grow even more.
Fort Worth has shown consistent population growth from 2018-2022, gaining nearly 30,000 new citizens, and the greater Dallas Fort-Worth area has also seen an influx of new faces. In fact, Fort Worth touts itself as the sixth-fastest growing city in the country. With its increase in new residents, Fort Worth shows promise for real estate investors looking to branch out into different markets.
Of course, shifts in population are not the only indicators of an area’s growth potential. Economic indicators, such as unemployment rates and job growth are also key when examining emerging real estate markets. Low unemployment rates, coupled with new businesses and jobs moving to the area, can help support population growth in an emerging market.
For Fort Worth, along with the greater Dallas-Fort Worth area, the job market shows strength and promise. The Bureau of Labor Statistics reports a gain of over 46,000 jobs in the professional and business services sectors, along with over 30,000 jobs in the trades and another 30,000 in education and healthcare sectors. These statistics point to a robust job market, which can make the region desirable for new residents and can also support higher rents for those looking to move to the area.
Emerging markets must invest in improved infrastructure to support the influx of new residents and new businesses flocking to the area. Without new infrastructure supports, communities in emerging markets can’t support growth over time. Investors should look for areas with governments that understand the demographic shifts that are impacting the local economy and can react appropriately to help foster a healthy economy and real estate market.
The government of Fort Worth has responded to its population growth and the needs of residents by investing in its infrastructure. Road construction to improve traffic, community center revitalization, and sewage/storm drain improvements are all listed among the city’s planned capital improvements.
In addition to spending money on improving infrastructure, emerging markets that are most appealing to investors also support favorable investment conditions. This might mean tax breaks for businesses looking to relocate to the area, and it can also include lower property taxes or less stringent regulations on property development.
Fort Worth offers tax incentives and loans for certain business industries, such as transportation, oil and gas, warehousing, manufacturing, healthcare, and tourism. The goal of these incentives is to bring new businesses to the area to support the improvement of the city. The local government considers itself to be pro-business, which can be a great sign for commercial investors and those looking to invest in real estate in the area.
Not all smaller cities are considered to be emerging markets. Having a population of under 1 million is just one piece of the puzzle. Increases in population growth, a robust local economy, ongoing infrastructure improvements, and favorable investment conditions are all essential for an emerging market’s potential success. DiversyFund’s team of real estate experts conducts thorough research on potential markets before diving deeper into specific assets.