Commercial real estate investors are ready for a bit of risk. According to a 2011 Colliers survey, more than half of U.S. investors surveyed are prepared to move out of their comfort zones in search of higher returns. Their adventures will lead them straight to non-core markets.
And with pricing still below replacement costs in many second- and third-tier cities, properties that fit investors’ criteria are already generating a lot of interest. Transaction volume in secondary and tertiary markets reached more than $57 billion in 2011, according to Real Capital Analytics, which tracks property sales valued at or above $2.5 million. Private investors were by far the most active, closing 2,398 deals totaling nearly $22 billion. Cross-border investors, non-listed real estate investment trusts, and equity fund investors accounted for many of the remaining transactions. As expected, multifamily properties were the primary targets.
Though bargains can be found in some secondary and tertiary markets, today’s savvy investors aren’t just looking at price. “They’re tired of waiting, and they want to find properties with good leases, strong tenants, and a good ROI,” says Jim Baker, CCIM, president of Baker Commercial Real Estate in Jeffersonville, Ind. “Plus, inflation may be just around the corner, and having assets is better than having cash.”
If it’s the right asset in the right market, that is.
Read more...Small(er) Markets, Big Opportunities | CCIM Institute
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