Urban Real Estate Resilience: Corporate Demand Fuels Premium Office Investments in Secondary U.S. Cities

The U.S. office real estate market is undergoing a profound rebalancing, with secondary cities emerging as engines of resilience amid stagnation in primary markets. According to a report by CBRE, non-gateway markets accounted for a growing share of Q2 2025 office leasing activity, driven by corporate demand for premium spaces in high-growth secondary citiesOffice Market Steadily Rebalances - CBRE^[1]. This shift is reshaping investment flows, as companies and capital prioritize locations offering affordability, talent access, and pro-business policies over saturated coastal hubs.

The Drivers of Corporate Relocation

Corporate relocations to secondary cities have accelerated since 2020, with Dallas-Fort Worth (DFW) leading the charge. Between 2018 and 2024, DFW attracted 100 new corporate headquarters, outpacing Austin (81) and Nashville (35)DFW Tops U.S. List For Corporate HQ Relocations^[2]. Key sectors like technology and manufacturing are spearheading this trend. For instance, NVIDIA established an AI supercomputer manufacturing hub in Dallas, while KFC and TIAA expanded operations in the regionCharted: The U.S. Cities Gaining and Losing Corporate HQs^[3]. These moves are fueled by factors such as Texas's lack of corporate and personal income tax, lower operational costs, and a growing workforce.

Similar dynamics are playing out in other Sun Belt cities. Austin, Texas, has become a magnet for tech firms, with Tesla, Oracle, and Apple driving demand for modern, flexible office spacesTop U.S. cities for office spaces in 2024 - Officelist^[4]. Meanwhile, Charlotte, North Carolina, is solidifying its status as a financial and tech hub, supported by its established banking sector and expanding fintech ecosystemWhy Smart Investors Are Choosing U.S. Secondary Cities in 2025^[5].

Investment Inflows and Market Resilience

The surge in corporate demand has translated into robust capital inflows. In Q2 2025, Dallas alone recorded over $901 million in office transactions, reflecting strong investor confidence in the city's premium assetsUS Commercial Property Investment & Transactions^[6]. Nationally, secondary markets accounted for $16.7 billion in office transactions during the quarter—a 11.8% year-over-year increaseAltus Group releases Q2 2025 U.S. Investment & Transactions Quarterly Report^[7]. Atlanta, Charlotte, and Raleigh-Durham also saw significant activity, with Atlanta's low cost of living and world-class infrastructure attracting both domestic and international investorsReal Estate Investment in Secondary Cities - Commercial and Residential Opportunities^[8].

The construction pipeline for new office space in secondary cities remains constrained, with only 6.3 million sq. ft. of new supply expected in 2025Office Market Steadily Rebalances - CBRE^[1]. This limited supply, coupled with sustained demand for high-quality spaces, is supporting gradual recovery. For example, Class A office absorption in Nashville and San Jose exceeded 100,000 sq. ft. in Q2 2025, underscoring the appeal of prime assets in secondary marketsU.S. Office MarketBeat Reports | US | Cushman & Wakefield^[9].

Challenges and Opportunities

While secondary markets show resilience, challenges persist. Vacancy rates in cities like Austin and Seattle remain above 27%, reflecting broader sector-wide pressuresU.S. Office Market Report August 2025^[10]. However, the market divide between prime and lower-quality assets is widening. Prime spaces in vibrant districts—such as DFW's Las Colinas or Miami's Brickell—continue to command premium rents, while older properties struggle to attract tenantsNavigating Office Capital Flows: Key Insights for Corporate Occupiers^[11].

Investors are also navigating a landscape of selective opportunities. Phoenix, for instance, saw its office sales price per sq. ft. rise to $197 in 2025, a 19.4% increase from 2024US commercial real estate transaction analysis – Q2 2025^[12]. Such trends highlight the potential for long-term appreciation in secondary markets, particularly where corporate relocations drive sustained demand.

Conclusion

The real estate resilience of secondary U.S. cities is inextricably linked to corporate demand for premium office spaces. As companies like NVIDIA and KFC anchor their expansions in markets like Dallas and Austin, capital is following suit, fueling a rebalancing of the national office sector. While challenges like vacancy rates and economic uncertainty linger, the combination of constrained supply, pro-business policies, and strategic relocations positions secondary cities as key growth corridors for investors seeking scalable returns.