WITH THE CORE MARKETS
OVERHEATED AND HIGHLY PRICED,
SAVVY INVESTORS ARE LOOKING
TO NON-PRIMARY LOCATIONS
FOR YIELD. YET DEFINING AND
FINDING THOSE OPPORTUNITIES
ISN’T A CAKE WALK.
As the search for yield continues to drive capital flows this year, attention has turned to non-primary markets and product types. While gateway cities will always be the
recipient of investor activity, secondary and tertiary markets will
likely account for a growing portion of investment sales.
Because there are lower barriers to entry, secondary and tertiary markets are often more desirable. Less competition keeps
prices lower than in primary markets, accommodating a wide
range of investor types. In addition, rising occupancy and rental
rates in secondary and tertiary markets yield higher returns,
given the lower investment required for real estate acquisition,
according to Colliers International.
The traditional primary markets such as the broadly recognized core gateway cities of New York, Los Angeles, San Francisco,
Chicago, Boston and Washington, DC (with San Francisco,
Chicago and Los Angeles routinely holding the largest US sales
volume) can be easily defined, but the waters get muddy beyond
that. There are 54 US metropolitan areas with populations of at
least one million, ergo, those are secondary markets it would
seem, but perhaps not.
When it comes to defining middle markets/non-primary/sec-ondary/tier two/tertiary/tier three cities, the definitions get as
murky as the terminology. What is middle market for one company may not be so for another company. And, some companies
eschew the term altogether, preferring to keep target lists close to
the vest or use another analogy.
“We actually spend most of our time in NFL and NBA cities. A
lot of demographics in those markets have been done for you,” says
Jay Rollins, managing principal of JCR Capital. “There can be good
deals and bad deals in every market. When we consider where we
By Lisa Brown
Middle Markets Digest