Secondary and tertiary markets are becoming increasingly attractive to commercial real estate (CRE) developers, a survey says. The survey – released jointly by Coldwell Banker Commercial Affiliates and publications National Real Estate Investor and Retail Traffic – found that 41% of developers and property owners believe that smaller markets offer the best development opportunities.
Forty-four percent of respondents plan to make additional investments in non-core markets this year, while 48% plan to upgrade their properties in secondary and tertiary markets. Core markets such as New York, San Francisco and Washington, D.C., remain the most sought after by large institutional investors.
"Smart money is looking at alternative markets due to better returns, higher upside and less competition," says Fred Schmidt, president and chief operating officer of Coldwell Banker Commercial Affiliates. "Secondary and tertiary markets allow investors to achieve a higher yield, along with diversification of assets and geography. They offer an opportunity to generate real wealth and returns."
According to the survey, the state of the local economy and availability of financing were the two most important factors for investors and owners weighing opportunities in secondary and tertiary markets.