What is an '18-Hour City'

An 18-hour city is a second-tier city with higher-than-average urban population growth and featuring a lower cost of living and lower cost of doing business than first-tier cities. In real estate investing, 18-hour cities are seen as viable investment alternatives to the "big six" markets of Boston, Chicago, Los Angeles, New York, San Francisco and Washington, D.C. — most of which are often dubbed 24-hour cities.

BREAKING DOWN '18-Hour City'

While loosely defined, the term "18-hour city" most often refers to a secondary real estate market that offers services, amenities and job opportunities comparable to those in the big six markets but without operating on a 24-hour basis. These cities typically feature widespread urban development, a solid public transportation infrastructure, a strong economy and moderately priced housing.

For real estate investors, 18-hour cities have emerged as a more affordable investment option than larger markets with higher prices that can compromise yields. These cities are attractive because they typically feature lower capitalization rate compression, meaning property values tend to remain stable rather than spiking up or down significantly. Like first-tier cities, however, 18-hour cities often boast low vacancy rates, along with favorable supply concentrations, rent growth and absorption trends — all indicators of long-term real estate investment returns.

One potential downside, however, is the increased degree of risk associated with 18-hour city investments because they do not have the established track record of primary market cities.

Examples of 18-Hour Cities in the U.S.

In a research note for the third quarter of 2017, real estate firm JLL reported that despite broader market declines in real estate investment activity, secondary markets saw the largest share of overall investment since 2009, with Dallas and Atlanta leading activity.

Growth and interest in 18-hour cities typically spike when the broader economy experiences robust growth. For example, 18-hour cities such as Seattle, Portland, Orlando and Salt Lake City were all considered among the fastest-growing U.S. cities in 2017. As of January 2018, these cities are also projected to perform well with regards to job growth, wage growth and home price growth, outpacing much of the rest of the nation.

Meanwhile, cities such as Charlotte, Seattle, Denver and Portland — and other commonly cited 18-hour cities — have become targets for millennials whose goal is launching or advancing their career. 18-hour cities are often characterized by the availability of recreation and entertainment opportunities that extend beyond what the typical suburban city affords. Employers are drawn to 18-hour cities because doing business is less expensive in these markets and this, in turn, attracts large numbers of job seekers and entrepreneurs.

RELATED TERMS
  1. Municipal Assistance Corporation ...

    Municipal Assistance Corporation was created by the state of ...
  2. Real Estate Market Tiers

    Real estate market tiers categorize cities as Tier I, Tier II ...
  3. Financial Hub

    A financial hub is a city or region that is considered to be ...
  4. Real Estate Investment Group

    A real estate investment group is an organization that builds ...
  5. Bailout Takeover

    Bailout takeover is an urgent acquisition of a financially unstable ...
  6. Metropolitan Statistical Area (MSA)

    Metropolitan statistical areas (MSA) are regions with largely ...
Related Articles
  1. Personal Finance

    Top 10 Most Expensive Cities in the U.S.

    New York City tops the list of most expensive cities in the U.S., and five of them are located in California.
  2. Small Business

    The Best City to Become An Entrepreneur Is What?!

    These four U.S. cities form a new landscape of cities that nurture the entrepreneurial spirit.
  3. Investing

    The 8 Best U.S. Cities for Millennials

    For Millennials who want a tech- and start-up-friendly locale, these urban centers fill the bill, but they may need roommates to afford the housing.
  4. Investing

    Is 2017 the Year to Invest in a Rental Property?

    The rental housing forecast looks positive for 2017, and for some would-be real estate investors it may be the right time to acquire a rental property.
  5. Managing Wealth

    World Cities With The Highest Quality Of Life

    Cities that usually top quality of life surveys have similar characteristics – they are usually midsized, with populations of a few million and a lower population density, and located in developed ...
  6. Personal Finance

    Top 10 U.S. Cities For Jobs From Glassdoor

    A look at the top 10 cities for jobs
  7. Personal Finance

    Beijing: Where You Pay More in Rent Than You Earn

    A look at house prices and data of 15 cities around the world
  8. Investing

    World's Most Expensive (and Cheapest) Cities

    The latest study points out that expensive does not always mean livable and cheap may subject you to other kinds of costs.
  9. Retirement

    2016’s Three Most Expensive U.S. Retirement Cities

    Think twice before you decide to retire to New York, Honolulu or San Francisco. Talking to a financial planner can help you figure out what you can afford.
RELATED FAQS
  1. What is the historical capitalization rate for real estate in New York City?

    Find out about historical trends in Manhattan real estate capitalization rates, and learn how these rates are used by people ... Read Answer >>
  2. Challenges in Real Estate Development

    Real estate development can sometimes be hindered by both risks and legal restrictions, but by knowing what to do may help ... Read Answer >>
Trading Center