Recent college graduates continue to prefer major gateway markets such as New York, Los Angeles and San Francisco over big cities in the fastest-growing U.S. regions such as the Sun Belt, a new study found, a move that's expected to affect the commercial property market.

More than 692,000, or one-third of the 1.98 million 2023 graduates of U.S. universities who got a job in office-using industries, settled in the markets that serve as gateways to business regions, according to the report from brokerage JLL titled Class of 2023 Graduates Gravitated to Gateway Markets. In contrast, seven large markets in the Sun Belt markets, from Atlanta and Miami to Phoenix and San Diego, attracted a combined total of almost 280,000, or about 14%, of the graduates, according to JLL data.

In fact, the leading regional gateway markets in the report, New York, Los Angeles, San Francisco, Boston and Chicago, each attracted more than 75,000 graduates and combined became home to more than 27% of the total group, according to JLL. New York City alone attracted 200,394, or more than 10%, of the total graduates.

Among these population centers that are anchored by a major, bustling city serving as the economic engine for a larger region, Los Angeles attracted the second-highest number of students who earned a bachelor's degree and landed an office job with 97,438, and the San Francisco Bay area placed third with 83,231, according to the JLL study.

According to JLL, the top-performing Sun Belt market of Atlanta attracted 51,096 graduates, while the Dallas-Fort Worth area lured 50,092.

"Although lower-cost Sun Belt markets have seen outpaced growth for much of the last decade — driven by strong domestic migration and corporate migration chasing lower costs and higher quality of life — gateway markets still possess key advantages as talent hubs: university population and especially elite universities are highly concentrated in gateway markets," JLL said in the report.

The trend of new graduates living in cities that serve as regional gateways can help benefit office owners in cities such as New York and San Francisco that have faced occupancy losses since the pandemic started in March 2020, the brokerage said. It also can benefit multifamily property in cities that attract large numbers of graduates from other places.

"It shows that while migration trends are important, it’s also important to look at the strength of institutional anchors in a metro area and how that drives demand," Jacob Rowden, a JLL research manager, said in an email.

Higher education is "a great example" of a permanent institutional anchor because, in gateway cities, some of the best colleges and universities were established between 100 and 200 years, Rowden said. "While we’ve seen notable shifts in economic momentum in various U.S. cities over the past 50 years, the landscape of higher education in the U.S. has remained relatively static," he said.

Rowden said the prestigious colleges and universities in gateway cities help them attract new graduates and keep them.

"The permanence of higher education institutions, and their importance in developing what becomes the next generation of office users act as a magnet in driving economic activity across their proximate metro areas," he said.

Gateway cities have topped the list of most popular places for new college graduates for the past several years. Sun Belt cities such as Atlanta, Dallas and Houston cracked the Top 10 but remained far behind New York, Los Angeles, San Francisco and Boston, according to the JLL report.

When seeking a job in commercial real estate, new graduate Youngsoo Yang set his sights on Chicago, the regional gateway city that attracted the fifth-highest number of bachelor's degree earners last year. Yang, who earned a master's in architecture and urban design from Harvard University in 2023, said he wanted to live in Chicago for some of the same reasons as his counterparts in the study who earned bachelor's degrees.

"All things equal, I would pick the job in the gateway city for both professional and personal reasons," Yang said in an email. "Larger cities have more career and networking opportunities with people from diverse backgrounds and talents that are important to my professional growth. Personally, I wanted to live in a city with well-connected public transit and a major airport hub as I like to travel domestically and internationally."

Chicago, Yang said, "checks those boxes easily," and its cost of living "is relatively more affordable compared to other major cities like NY, SF, LA and Boston."

Yang, who was born in Seoul and grew up in the South Korean capital and in Moscow and Baku, Azerbaijan, likes living in big cities. He focused his job search on opportunities in Chicago. Six months after getting his master's, he landed a job as a capital markets analyst at JLL.

"I reached out to a lot of professionals in Chicago and got connected with a few at JLL," he said. "Fortunately, the Capital Markets team had an opening at the time which was exactly what I wanted at this stage in my career — getting exposure to a lot of transaction volumes, understanding the dynamics of debt and equity in the market, especially during a challenging period, and a platform to leverage its incredible network, resources, and reputation in Chicago and globally."

The pandemic has shifted some of new graduate living preferences to smaller markets, especially in the Midwest, JLL said. Those smaller markets including Columbus, Ohio, Madison, Wisconsin, and Ann Arbor, Michigan, "saw their share of graduates rise to 2.2% from 1.9%, indicating some of the success well-educated smaller tertiary cities have enjoyed in the wake of the pandemic and more flexible work settings," JLL said in the report.