Why people are flocking to these 10 'blue island' cities

• Blue cities in red states, dubbed "blue islands," are attractive to workers due to the jobs.
• Companies are expanding in these cities, drawn by factors like talent and local business policies.
• These cities do face challenges from the rapid population growth.

It may seem like it would feel isolating to live in a Democratic city in a Republican state, but these "blue islands" are now some of the most attractive places to live, especially for younger Americans.

Cities like Austin and Nashville combine the best of both worlds: They are fun places to live, but there are also often lots of high-paying jobs because companies also want to be there to take advantage of the talent pool and the pro-business state government.

According to Bank of America's internal data, the five fastest-growing cities in the US in 2023 are Austin, San Antonio, Las Vegas, Jacksonville, Tampa, and Philadelphia. All six are blue cities, and four of them — the Texas and Florida cities — are in red states. Meanwhile, Vegas and Philly are both in swing states.

Other large blue island cities include Phoenix, Atlanta, Nashville, and Salt Lake City.

What all 10 of these cities have in common is they all have established or growing reputations as tech hubs that are attractive to young workers.

Nashville is a perfect example

The number of tech jobs in Nashville rose by 17% from 2017 to 2022, according to a study conducted by the Greater Nashville Technology Council and Tennessee State University.

Amazon was a major employer for many of those jobs.

The tech giant already had 9,000 employees in Nashville before Amazon decided to open its East Coast operations hub in the Tennessee capital. That is expected to add 5,000 more jobs with an average annual salary of $150,000.

Holly Sullivan, Amazon's vice president of worldwide economic development, told CNBC's "Cities of Success" that Nashville was a natural fit, noting the city had workers who could meet their tech needs.

"The No. 1 driver when any company is making a site-selection decision is going to be that talent," Sullivan said. "The Day 1 talent, but also that long-term talent pipeline. Nashville checked that box."

Oracle, already based in Austin, is now in the works to open a $1.4 billion hub in Nashville that is expected to hire 8,500 employees with an average annual salary of $110,000.

Tennessee's Department of Economic and Community Development told CNBC that Oracle chose Nashville because of the lack of a state income tax and quality of life for its employees.

But it is not just talent: The businesses also love that red states tend to be pro-business.

"We found that we could find the talent here," Sullivan said. "We also found Tennessee and the city to be very business-friendly with policies that support our business growth. When you find that, you want to double down on that."

According to The Tennessean, the deal to open Amazon's hub came with $102 million in city and state funding incentives.

In the case of Oracle, the state is helping cover the cost of moving for the company, and the software firm will also be reimbursed for 50% of its property taxes for 25 years.

The best of both worlds

Former Republican Governor of Tennessee Bill Haslam was asked by CNBC about the dynamic of bringing businesses to a blue island city.

"There is a recipe that works for the businesses," Haslam said. "They can have what their employees like and want: a big, diverse environment with a lot of entertainment, but also get what the business wants: low taxes and a friendly business environment."

Of course, these aren't just benefits for tech companies and their employees.

In the last 30 years, other companies that have relocated to the Nashville area include Pillsbury, Apple Music, UBS, Smile, Postmates, Google Fiber, Lyft, Sony, Nissan, and Warby Parker, according to CNBC.

All these companies bring investment and jobs to the area, and people in the city benefits from the economic impact. For example, according to Amazon, the company is leasing more than one million square feet of office space in downtown Nashville.

Blue islands are a fragile balancing act

Another attraction to these cities, at least initially, was the lower cost of living compared to previously trendy cities like San Francisco and New York.

However, one of the dangers of the influx of companies and employees is the city growing too fast. It can often be difficult for them to keep up with the needs of a more crowded area.

Both Nashville and Austin have already gone through population booms that have increased demand for housing and sent real estate prices soaring. Those cities are also now struggling to keep up with infrastructure needs.

And then there is the politics of it all.

If any of these red states turn solidly blue, these companies could decide that a potential decrease in incentives is no longer worth hanging around.

A more immediate issue is the recent strict bans on abortion in red states. Some workers may have to weigh whether the benefits of their blue cities are worth the contrast in values with the state. There is some evidence that this is already happening.

In the meantime, working-age people are flocking to these blue islands for jobs and a more enjoyable lifestyle and companies are happy to oblige.