Will Secondary Market Magnets Redraw Big Builders’ Footprints?

We’re at the trailhead of what economists call

Where the discrepancy between current land and development investments and where the economic engines of growth – talent, earning power, younger adult household concentration – seem to be revving up is worth exploring.

In research he completed for the think tank Heartland Forward, demographer/ business strategist/author Richard Florida notes:

Despite the continued dominance of a few coastal metro areas, many more affordable places have made considerable strides in attracting talent in the nation’s heartland, which according to our definition covers 20 states in the center of the country running from the Midwest to the Sun Belt.

These include larger metro areas like Austin, Nashville, Minneapolis-St. Paul, Kansas City, St. Louis, Oklahoma City, Des Moines, Omaha, Columbus and Cincinnati. Smaller college towns and cultural hubs like Ann Arbor, Michigan; Madison, Wisconsin; and Iowa City, Iowa, also rank as significant talent hubs.”

Florida’s “new geography” map – in contrast with the markets many of homebuilding and development’s most active investors and operators have focused on – includes a significant number of “flyover” or heartland markets. Many of these are the domain of successful single or multi-market privately held homebuilders, but aren’t, yet, mapped into the strategies of the larger, public builders, save for D.R. Horton, which has enjoyed secondary and tertiary market dominance for years.

Recently, Lennar added Idaho, Wisconsin, and Alabama to its operating footprint, indicating both a more nimble operating and overhead management capability and a believe its expansion investments will validate themselves as permit and economic growth arc upward.

Are homebuilders and developers – as frantic as they are to secure hard to get land positions in their long-time comfort zones – on a convergence course with the  “new geography” of the future of talent, jobs, and economic growth? A pivot may be in the works, and if it is, there are lots of stand-out privately-held homebuilding operators in those fly-over state hubs that are getting a closer look as dozens of strategic, investor, foreign, and other less conventional buyer prospects map their own mid-term and longer-term futures.

Florida writes:

A few decades ago, coastal cities attracted talent because of their thick labor markets and unique bundles of amenities — like restaurants, cafes, nightlife and museums — that knowledge workers with a choice about where to live could not find elsewhere. But over the past decade or so, as these places have become more expensive, smaller metros in the center of the nation have worked hard to improve their offerings, adding bike trails and other outdoor amenities and drawing in better restaurants, cafes and music venues, in part because of their more affordable real estate.”

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