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

Although Miami did not make the list, as downtowns recover across the U.S., the report highlighted the city’s uniquely vibrant retail sector. “We’re seeing improvement in Boston and D.C. But the big story for us is Miami,” one brokerage analyst was quoted in the report. It used to be when a foreign luxury concept came to the [U.S.] that their first store would be in Manhattan, the second one either in Los Angeles, San Francisco or Chicago. Suddenly, Miami is in the number two or three slot.”

“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.

While there is a general call to repurpose high-vacancy office buildings, some industry leaders say demolishing them to repurpose the land is more economical.

“Converting office spaces into other types of properties is overhyped,” said an executive with a development firm, quoted in the report. “While some conversions are feasible, not all office buildings can be economically converted … the percentage of office inventory that can be converted to residential or other viable uses is actually pretty small. And the valuation has to get to a much lower basis before a lot of significant changes happen.”