The Top 10 Mid-Sized US Markets for Office Tenants

Since the start of the pandemic, there has been a plethora of data and anecdotes about young professionals relocating from gateway cities — such as New York, Los Angeles or San Francisco — to smaller urban and suburban locales in less populated parts of the country.

This narrative has been particularly focused on the Sunbelt states and the data seems to support it. According to information recently released by the Census Bureau, between the summer of 2021 and the summer of 2022, New York’s population decreased by approximately 180,000 people — the largest out-migration in the country — while the population in Illinois and California fell by approximately 100,000 people each during the same time period. Meanwhile, Florida and Texas experienced population increases of more than 400,000 people respectively. And they weren’t the only Sunbelt states to enjoy growth; North Carolina had the third largest influx of individuals on a percentage basis (1.7%) during that timeframe.

In an era of broadening work from home policies, and as notions shift about where major businesses need to be located to succeed, it’s possible that employers might start following the talent. And if an employer was inclined to do just that, what markets should they consider?

Using data and analysis from CoStar Group (publisher of LoopNet), LoopNet developed a list of the top 10 mid-sized markets for office users. The list was based on the following parameters:

• Size: Markets with 50,000 to 400,000 current office workers.
• Office focus: Office-using workers as a percentage of the entire labor force exceeds the national average of 22.5%.
• Growth: The projected growth rate of office workers exceeds the national average of 0.45%.
• Inventory: Planned and completed new office inventory (constructed within the last 15 years) as of January 1, 2028, exceeds the national average of 10%.
• Cost: The current average rental rate per square foot for office product is below the national average of $35.17 (as of Q4 2022).

According to Phil Mobley, national director of office analytics in the U.S. for CoStar, the most critical factor is an existing base of office workers, as well as projected growth in those employees. “You can't really have a serious conversation or thought process about opening an office somewhere if you don't have that underlying pool of available talent,” he said. Mobley noted the persistent flight to quality in the office sector was also a significant consideration in these rankings, with the percentage of new space in the market by 2028 serving as a proxy for that metric.
Based on these and other qualitative factors, the 10 mid-sized markets that emerged from our analysis were:

1. Provo, Utah
2. Boulder, Colorado
3. Raleigh, North Carolina
4. Salt Lake City, Utah
5. Nashville, Tennessee
6. Northwest Arkansas
7. Charlotte, North Carolina
8. Huntsville, Alabama
9. San Antonio, Texas
10. Greenville, South Carolina

Mobley emphasized that it’s highly unlikely that the major gateway office centers will cease to dominate the office sector. But as the volume of talent in secondary markets grows, they can be a compelling alternative for some companies — especially markets that sit at the tantalizing intersection of lower costs and prevalent talent.

And the cost of that talent is notably discounted compared to larger markets. That factor, more than the cost of office space itself, is what will compel office users to consider a secondary market. “The cost of employing a worker is much more than the cost of providing office space for that worker, somewhere on the order of 10 times more,” Mobley added.

Up until recently, the Provo MSA (Metropolitan Statistical Area) was primarily known as the home of Brigham Young University, the largest and most-established private university in Utah, but that reputation has evolved in the past decade. As Michael Petrivelli, director of market analytics for CoStar said, “You've seen it grow from this sleepy suburb into a bustling center of office activity.”

That shift has been largely attributable to the tech sector, which was responsible for “the biggest transformation in the metro,” according to Petrivelli. Tech luminaries with large presences in the MSA include Ancestry.com, eBay and Adobe, which completed the construction of a new 246,000-square-foot office property in 2021.

While the current percentage of office users in the market is aligned with the national average at 23%, the projected growth in that workforce, at 1.4%, is nearly triple the national average of .5%. And all of those workers will have a bevy of new office space to choose from, with 45% of the market’s inventory expected to be less than 15 years old by 2028. That’s the greatest share of new inventory found among any of the cities on this list; in fact, it’s almost double the share of new inventory of its nearest competitor.

Provo also offers an appealing lifestyle for office workers. Like much of Utah, the city is known for its outdoor recreation opportunities, including numerous ski areas and Utah Lake, which is directly adjacent to the city. The Salt Lake International Airport is also nearby, making business and recreational travel to and from the metro relatively easy.

For all its attributes, Provo has limited public transportation outside of the BYU campus area. However, some Provo office workers use the commuter train, Frontrunner, and choose to live in neighboring Salt Lake City, which offers a more robust “live, work, play” environment.”

Key Metrics
Percentage of office-using workers: 23%
Projected annual growth in office using workforce over the next five years: 1.4%
Projected new office inventory as of 2028: 45%
Average office market rent as of Q422: $22.85
Projected annual rent growth over the next five years: 0.5%

Like its predecessor on this list, Boulder is a college town — the University of Colorado Boulder is based there — with a reputation for offering a myriad of outdoor recreation opportunities and nearly unparalleled access to the Rocky Mountains.

However, Boulder also possesses another quality that is difficult to quantify: its “cool factor.” This qualitative aspect of the city is largely derived from its eclecticism, according to CoStar director of market analytics, Jeannie Tobin. “You're going to find award-winning restaurants right alongside college bars,” she said. “A lot of people live there because they don't want to live in a big city, but they still want to enjoy a lot of the amenities of a big city.”

Tobin said that Boulder’s reputation as a destination for office users has grown considerably over the past decade. It began with smaller tech startups that leveraged the presence of a major research university to establish their employee base. Over time, many of those startups were acquired by larger tech companies, including Google and Amazon, which have continued to maintain a significant presence in the market.

However, office space in Boulder comes at a premium. The average office market rent stood at $34.78 at the time of this analysis, the highest rental rate of any market on this list, and just below the national average of $35.17.

Tobin added that those high costs are also prevalent in the local housing market, so employers may need to compensate their workers to a greater extent than in some of the other markets on this list.

Key Metrics
Percentage of office-using workers: 30%
Projected annual growth in office using workforce over the next five years: 0.5%
Projected new office inventory as of 2028: 25%
Average office market rent as of Q422: $34.78
Projected annual rent growth over the next five years: 0.5%

While the presence of a major educational institution is a persistent theme in this top 10, it’s hard for any of the other markets to compete with Raleigh in that regard. The state capital boasts three major research universities — North Carolina State, Duke University and the University of North Carolina.

This critical mass of prestigious research institutions has long made Raleigh a hub for life science and pharmaceutical companies, many of which have a presence in the area’s famed Research Triangle Park, the largest research park in the country.

However, according to Nick Leverett, CoStar’s director of market analytics for the area, Raleigh has “become a little more of a destination for tech,” over the past decade. Local companies, Bandwidth Inc. and Red Hat Software, as well as the ShareFile subsidiary of Citrix, are headquartered there. Bandwidth, Leverett noted, is currently constructing a more than 400,000-square-foot headquarters in West Raleigh. Projects like that contribute to Raleigh’s relatively high percentage of new office stock, which will total 23% by 2028.

Raleigh is known for its “lower cost of living than a lot of the big gateway markets,” said Leverett, which is beneficial to both employers and employees. That may be part of the reason that despite the metro’s already high share of office workers (30%), the projected annual growth of office employees over the next five years is a robust 1.3%.

Key Metrics
Percentage of office-using workers: 30%
Projected annual growth in office using workforce over the next five years: 1.3%
Projected new office inventory as of 2028: 23%
Average office market rent as of Q422: $28.62
Projected annual rent growth over the next five years: 1.6%

Salt Lake City is a more established and diversified office market compared to its stateside brethren, Provo. According to Petrivelli, tech sector growth has been a factor in Salt Lake City’s evolution over the past decade, but it’s far from the only use that’s prevalent in the Utah capital.

The financial services sector has long played a significant role in the market; the homegrown Zions Bank is headquartered there, and Goldman Sachs has centered its back-office functions in the city for more than 20 years. Petrivelli added that biotech and pharmaceutical companies are also expanding in the city. He referenced the Gateway — a thriving mixed-use development in Downtown Salt Lake City that recently attracted prominent biotech firms including Perfect Day and Recursion — as a hub for the sector in Salt Lake City.

As for what’s attracting this diverse roster of office users to the area, it once again is centered around the intersection of a high quality of life and lower cost of living. “It's a market that has seven world-class ski resorts within a 30 to 45-minute drive,” said Petrivelli.

The city’s office space remains affordable, with an average rental rate that’s 28% below the national average. Of course, those bargains may not persist for much longer; office rental rates in Salt Lake City are expected to rise at an annual rate of 1.4% over the next five years.

Key Metrics
Percentage of office-using workers: 28%
Projected annual growth in office using workforce over the next five years: 0.7%
Projected new office inventory as of 2028: 22%
Average office market rent as of Q422: $25.35
Projected annual rent growth over the next five years: 1.4%

Nashville may be known as “Music City,” but the Tennessee capital has a diversified employment base — with office workers comprising 27% of the city’s employees. And that office user base has expanded significantly over the past decade. According to Michael Cobb, director of market analytics for CoStar, Nashville’s office-using employment grew by 90% between 2010 and 2022.

And many expect that growth to continue, with CoStar predicting 1.2% annual growth in Nashville’s office using workforce over the next five years. The presence of major educational institutions, including Vanderbilt University, and a thriving live, work, play environment will contribute to that development.

“The constant influx of population and a youthful, well-educated workforce, coupled with strong options for both living and office space, tends to bring about a pretty good ecosystem for future office using prospects,” Cobb summarized.

An eclectic group of employers, from tech giants to auto manufacturers, drives Nashville’s growth. In 2018, Amazon selected Nashville for its east coast operations hub, and the company has begun occupying the first of two towers it has planned within the $1 billion mixed-use Nashville Yards development.

Meanwhile, the major financial services firm, AllianceBernstein, recently relocated its corporate headquarters to Nashville, officially unveiling its 221,000-square-foot office last summer. And auto companies, including Nissan and General Motors, have long looked to Nashville for their manufacturing needs. While the auto brands may be focused on industrial space, Cobb noted that all of those manufacturing jobs tend to require office-using jobs to support them.

Key Metrics
Percentage of office-using workers: 27%
Projected annual growth in office using workforce over the next five years: 1.2%
Projected new office inventory as of 2028: 23%
Average office market rent as of Q422: $30.38
Projected annual rent growth over the next five years: 1.5%

It might be fair to refer to Northwest Arkansas — an MSA that comprises several small cities in the northwest corner of the state along Interstate 49, including Rogers, Bentonville and Fayetteville — as the market that Walmart built. According to Bill Kitchens, CoStar’s director of market analytics for the MSA, Walmart’s corporate headquarters is a major driver for the entire region. It attracts numerous consumer goods manufacturers and logistics companies that desire proximity to the retail behemoth’s Bentonville headquarters, which will soon span more than 350 acres and be the largest mass timber development in the country.

Kitchens emphasized, though, that beyond Walmart, the Northwest Arkansas MSA has proven to be notably healthy from an economic perspective over the past several years. The area recovered from its pandemic job losses within approximately 14 months and then drove headlong into job expansion mode at a pace “well ahead of many other faster growing [from a population perspective] markets in the southeast.” And it’s exceptionally affordable, with office rent at only 64% of the national average, making it the second most affordable market on this list.

The MSA has another feature that’s likely to appeal to many urbanites seeking a different pace of life. “It's a huge mountain biking mecca destination,” said Kitchens. Many of the new office projects in the area have been built with “bicycle garages” just to accommodate the area’s numerous cycling enthusiasts.

Key Metrics
Percentage of office-using workers: 24%
Projected annual growth in office using workforce over the next five years: 1.1%
Projected new office inventory as of 2028: 24%
Average office market rent as of Q422: $22.56
Projected annual rent growth over the next five years: 0.4%

The city with the largest office-using population on this list, featuring nearly 375,000 workers, Charlotte is a financial center and headquarter location for the some of the country’s largest banks, including Bank of America and Truist Bank.

Chuck McShane, CoStar’s director of market analytics in the MSA, said that the concentration of financial services companies attracts large professional services firms, and both those industries appeal to recent college graduates.

“It’s a post-college destination for a lot of folks. You can advance your career in Charlotte without having to live in a shoebox with four roommates like you would in New York,” he said.

Despite its already relatively high share of office workers (29%), Charlotte is expected to experience impressive growth in the office using sector over the next five years, at an annual pace of 1.5%, triple the national average.

McShane said that much of the recent leasing activity and office development in Charlotte has been focused on the city’s South End neighborhood, where new light rail stations have attracted a diverse mix of multifamily, retail and office projects. On the other hand, he noted that the aging bank towers in the Uptown neighborhood are going to require significant renovation budgets in order to remain competitive in the years ahead.

Key Metrics
Percentage of office-using workers: 29%
Projected annual growth in office using workforce over the next five years: 1.5%
Projected new office inventory as of 2028: 22%
Average office market rent as of Q422: $30.65
Projected annual rent growth over the next five years: 1.9%

Hunstville has a unique focus that’s tied to its longstanding status as one of the premier aerospace markets in the country. The largest NASA center, the George C. Marshall Space Flight Center, is located there, which means that numerous defense contractors, including Boeing and Northrop Grumman, also have a considerable presence.

“Huntsville serves as the growth engine” for the entire state, according to Kitchens, and that growth has been accelerating in recent years. “Over the past decade, the metro has added 20% to its population base,” Kitchens added.

While much of the employment growth has been in auto manufacturing — Toyota and Mazda both have significant facilities in the MSA — Kitchens said that the industrial growth tends to bring tangential office employment with it.

Kitchens also noted that the University of Alabama in Huntsville, which has a particularly well-regarded engineering program, provides a steady stream of highly-qualified employees to the market that are well-suited to the metro’s primary office uses.

Yet, those uses are evolving. Kitchens highlighted Adtran — a technology company focused on networking and communications that was founded and remains headquartered in Huntsville — as an example of a newer kind of user that’s attracted to the city for its concentration of talent and affordable cost of living.

And that affordability extends to the office market. Huntsville has the lowest average rental rate for office space of any metro on this list, coming in at 57% of the national average, with only 0.2% annual growth expected over the next half a decade.

Key Metrics
Percentage of office-using workers: 29%
Projected annual growth in office using workforce over the next five years: 0.9%
Projected new office inventory as of 2028: 21%
Average office market rent as of Q422: $20.15
Projected annual rent growth over the next five years: 0.2%

Diversity is the perhaps the best adjective to describe the San Antonio’s office market, said Daniel Khalil, senior market analyst for CoStar.

San Antonio has a notable concentration of financial services and technology office users, such as USAA Bank and Frost Bank, two of the largest banks in Texas, which are both headquartered in the city. There is also a large base of medical office users, which is bolstered by the South Texas Medical Center.

Meanwhile, the metro has also developed a reputation as a hub for cyber security firms. In fact, Khalil said that San Antonio touts itself as having the second largest number of cyber security companies in the United States, outpaced only by Washington, D.C.

Though its overall share of new office inventory as of 2028 is not among the highest on this list at 18%, Khalil emphasized that much of the new office development in the city has been in four- and five-star properties, which makes the city an attractive destination for users interested in joining the flight to quality.

Like some of the other markets on this list, one of the shortcomings in the MSA is its lack of transportation infrastructure. “It’s the largest city in the United States without rail,” Khalil said. However, investments in other aspects of the city’s infrastructure, including widening sidewalks and adding bike lines, may at least somewhat ameliorate that deficiency.

Key Metrics
Percentage of office-using workers: 25%
Projected annual growth in office using workforce over the next five years: 1.1%
Projected new office inventory as of 2028: 18%
Average office market rent as of Q422: $27.73
Projected annual rent growth over the next five years: 1.5%

Greenville’s ascendancy — it’s the largest metro in South Carolina, with a population that’s approaching the 1 million mark — begins not with office, but with the industrial sector.

It was the twin blessings of a large BMW factory and Clemson University, which developed a well-regarded engineering program and accompanying research and development facilities, that put Greenville on the modern economic map, explained McShane.

“You have this cluster of engineering talent and industrial talent and then, to support that, you also need some office functions,” said McShane.

Those office functions have expanded over the past decade, McShane said. In particular, financial services and insurance companies have grown in the metro — TD Bank, for instance, now has a large campus in Greenville.

McShane said that the local government has taken steps to support this office sector growth, particularly in its efforts to revitalize the city’s downtown. Meanwhile, creative office tenants have discovered the possibilities in adapting some of the city’s old mills into office space. The mixed-use Judson Mill project, which debuted in 2021, was cited by McShane as an example of the possibilities inherent in these older structures.

And while the office using population (23%) only barely exceeds the national average, rent is quite reasonable, and it is predicted to grow at a relatively slow rate of 0.3%.

Key Metrics
Percentage of office-using workers: 23%
Projected annual growth in office using workforce over the next five years: 0.6%
Projected new office inventory as of 2028: 14%
Average office market rent as of Q422: $21.24
Projected annual rent growth over the next five years: 0.3%