The Midsize City Surge: How Regional Hubs Are Redefining B2B Growth

The American economic landscape is undergoing a quiet revolution. While major cities like New York and Los Angeles dominate headlines, midsize U.S. cities—populations between 100,000 and 500,000—are emerging as engines of B2B growth, outpacing their larger counterparts in accounts payable spending and resilience. This shift, driven by lower operational costs, digital adoption, and localized supply chains, is creating fertile ground for investors to capitalize on undervalued opportunities in sectors like tech infrastructure, logistics, and small business financing. Let's dissect the data and uncover why now is the time to pivot toward these overlooked markets.

The Growth Divide: Midsize Cities Outperform in a Post-Pandemic World

The numbers are striking. Since March 2020, B2B accounts payable spending in midsize cities has surged 200%, compared to 113% in large urban centers. By May 2024, midsize cities maintained a 32% annual growth rate, versus just 11% for large cities. Even post-tariffs in February 2025, the gap widened: midsize cities grew at 5.5% annually, while large cities stagnated at 1.9%. This divergence isn't accidental—it's the result of structural advantages.

Regional Drivers: Why the South and West Are Leading the Charge

The fastest-growing midsize cities are concentrated in the South Atlantic (e.g., Mesquite, Texas; El Monte, California) and West South Central regions. Two forces are at play:
1. Demographic Migration: Over 2 million people relocated to the South from other U.S. regions by 2022, drawn by affordability and quality of life. Retirees and remote workers now favor cities like Beaumont, TX, and Pompano Beach, FL, over crowded urban centers.
2. Entrepreneurial Boom: Small and medium businesses (SMBs) in these regions grew at 75% post-pandemic, fueled by business-friendly policies, affordable housing, and robust infrastructure.

Sector-Specific Opportunities: Where to Invest

The data reveals clear sectoral winners in midsize cities:

1. Tech Infrastructure (Information & Professional Services)

Midsize cities are adopting digital tools at a faster clip than large urban centers. Sectors like Information (cloud computing, fintech) and Professional/Scientific Services (consulting, engineering) saw 20+ % growth in B2B spending since 2020.
- Investment Play: Target companies enabling remote work scalability (e.g., Zoom Video (ZM)) or cloud-based AP automation (e.g., Coupa Software (COUP)).

2. Logistics & Manufacturing

Localized supply chains are thriving in midsize cities, with Manufacturing and Construction sectors driving growth. Cities like Quincy, MA, and South Fulton, GA, are hubs for regional logistics networks.
- Investment Play: ETFs like iShares U.S. Transportation (IYT) or sector-specific stocks like XPO Logistics (XPO) could benefit from this trend.

3. Small Business Financing

SMBs in midsize cities face challenges like late payments (57% of sales delayed in 2020) but are ripe for financing innovation. Sectors like Administrative Services and Other Services (which include fintech) are critical.
- Investment Play: Regional banks like Truist Financial (TFC) or fintech platforms like Square (SQ) could capitalize on this demand.

The Risks—and Why They're Manageable

Despite challenges like 42% of B2B payments still using paper checks, the push toward digitization is unstoppable. Over 50 countries now enforce electronic invoicing standards, accelerating the need for automation tools. Meanwhile, 98% of businesses recognize AP automation as critical—creating a tailwind for tech solutions.

Conclusion: Positioning for the “Era of the Midsize City”

The data is clear: midsize cities are no longer secondary markets. They are primary drivers of B2B growth, fueled by migration, digital adoption, and sector-specific dynamism. Investors ignoring these trends risk missing out on the next wave of economic expansion.

Strategic allocations should prioritize:
- Tech infrastructure stocks enabling digital transformation.
- Logistics companies serving regional supply chains.
- Fintech firms or regional financial institutions supporting SMBs.

The “era of the midsize city” is here. Those who act now will reap the rewards.

Data sources: BILL Economics, U.S. Census Bureau, Federal Reserve Economic Data (FRED).