Midterm Shifts Test Red State Real Estate Dominance

A new study of nearly 24,000 commercial real estate transactions found that red states have generated higher investment returns than blue states for years. The analysis classified states based on their 2024 presidential election results and used a proxy to estimate returns. The data indicates a persistent performance gap between the two political groups.

Mitch Flax, founder and chief investment officer of Net Equity Capital, said the research began with a specific observation from a Chicago-based family office living in California. The firm told Flax it avoided investing in real estate within blue states. Flax decided to quantify whether political differences in state policy correlated with investment performance. His team analyzed the transactions to test that hypothesis.

Flax attributes the return gap largely to state-level business policies. He argues these policies influence where companies relocate and where capital flows. Corporate migration toward lower-tax states has risen in recent years. Texas has become a major destination for firms leaving high-cost coastal hubs. Flax says Texas is positioning itself to become a Singapore-style tax haven for companies.

"We've all seen the movie 'Crazy Rich Asians' get ready for Crazy Rich Texans, because that movie is coming," Flax said. He believes structural business policy, not just population shifts, drives the current migration patterns. "Most of the large asset managers out there are underwriting population in this migration flow. But the reality is that's a symptom," Flax told Fox News Digital. "When you look at exactly what's causing it, it's pure structural business policy," he added.

The findings arrive as Democrats made sweeping gains in Tuesday's midterm elections. These results include shifts in traditionally deep-red strongholds. The political changes raise questions about whether the policies that fueled red state growth will remain intact. Democrats are now in a position to enact new agendas in states that previously favored business-friendly rules.

Texas offers a stark example of the potential shift. The state flipped a U.S. Senate seat blue when James Talarico defeated Ken Paxton, who had the backing of President Donald Trump. Democrat Gina Hinojosa also defeated Republican Governor Greg Abbott to become the next governor. These results complicate the outlook for Texas as a top destination for corporate relocations.

A CBRE analysis reported earlier this year found that 725 companies relocated their headquarters between 2018 and 2025. Dallas-Fort Worth led the nation with 111 relocations. Austin followed with 88, and Houston had 31. In contrast, the San Francisco Bay Area recorded a net loss of 163 corporate headquarters during the same period. Companies leaving the Bay Area cited taxes, labor regulations, and rising living costs as primary reasons.

Flax says migration is a cascade effect of policy decisions. "Migration is the symptom, but it's a cascade, right? So policy draws people and companies and then every kind of commercial real estate follows," Flax said. "Apartments follow migration, retail follows rooftops, office follows jobs, warehouse follows logistics." He notes that as businesses move, workers follow, and demand for housing, retail, and office space grows in the destination markets.