This probably won’t come as a great shock to CRE owners on the ‘Left Coast’ (CA, OR & WA) but the U.S. Census finds that the flight from blue states hasn’t stopped.
According to the WSJ, “The U.S. population increased by 1.6 million between July 2022 and July 2023, with states in the South accounting for about 1.4 million of the growth. Leading the boom were Texas (473,453), Florida (365,205), Georgia (116,007), South Carolina (90,600) and Tennessee (77,512). Driving the growth was migration from other states.”
Did we mention that our investors own DST properties in all these states? Over the last decade we have invested aggressively in multifamily, self-storage and senior living across the southern tier.
We are particularly bullish on storage and private-pay senior living. Dislocation/relocation is one of the principal demand drivers for storage. With all these people on the move, their ‘stuff’ has to go somewhere while they are getting situated.
Private pay senior living may also benefit disproportionately from this southern migration. This is because “affluent residents are leading the exodus” from Democratic run states (WSJ).
People with more money will demand a higher level of care as they age. Hence, the desirability of private-pay senior living. Catering to an affluent clientele should also protect our investors against economic downturns. These folks simply have a bigger cushion.
CRE investors don’t need artificial intelligence to understand what’s going on here. Those blue states characterized by high taxes, burdensome business regulation along with inflated energy and housing prices are losing the socio-economic war to low / no tax, laisse-faire red states.
Rail as they will against right-leaning states as benighted and undemocratic, blue state governors such as California’s Gavin Newsom and Illinois’ J.B. Pritzker are bleeding people, money and business at an accelerating rate. If this continues, the former may be hard pressed to buy more hair gel.
As the more affluent leave democratic run states and illegal immigrants flood in (remember they are ‘sanctuary states’) income tax revenues could decline with a concomitant erosion in services and infrastructure. Income taxes support the majority of these states’ expansive welfare programs.
Recently, released Internal Revenue Service statistics indicate that for 2020, the top 1% of earners paid 42.3% of the country’s income taxes. These aren’t the folks you want to lose. Therefore, until blue states manage to reverse course, it may be a good idea for CRE investors to stash as much cash as possible in red states.
DST properties can make this process much easier than it would otherwise be. It only makes sense for investors to avail themselves of this and attempt to avoid the continuing self-flagellation of blue state CRE ownership.