Investor Focus Moving to Select Secondary Markets

Posted March 22, 2012

In California, Columbus, Commercial, Los Angeles, net lease, Ohio

As primary markets get ridiculously overpriced and the much preferred single tenant, triple net or absolute net corporate leased retail properties more and more unavailable, investor focus is shifting to secondary markets such as this one, Columbus, and Seattle Dallas, Phoenix and even Detroit. Solid deals are around in these markets and with interest rates as low as they are right now, much of this makes much sense.

“Through the first two and half months of 2012, our firm just surpassed revenue and transaction levels through 10 months of 2011. We have seen an explosion of acquisition activity here at the office,” said A.J. Beachum, senior sales associate, Income Property Organization in Bloomfield Hills, MI, a Detroit suburb.

Beachum attributes the increase to several factors: “First, the local reappearance of capital-both debt and equity, which has greatly expanded the buyer pool, which in turn spikes pricing as there is now more competition, as it was previously all-cash buyers for distressed sales,” Beachum said.

“Second, given the epically low cost of new debt right now, it gives buyers some serious purchasing power, and has enabled them to bridge the “pricing gap” that previously existed between sellers and buyers,” he said.

“Third, there is the general sentiment locally that the worst is clearly behind us, so the local economic (and national) news has cajoled some buyers that now is the time to get a deal done. These are investors who were previously too scared to put their equity on the line,” he added.

True, this will burn itself out at some point in the future and we’ll be off to something else. What we have here is a rolling recovery from primary major coastal markets to secondary markets and then as these markets get overpriced to the point that the fundamentals don’t make sense anymore, we’ll be heading to something else. Does this all sound familiar? Yep, it’s the typical cycle and there never is much equilibrium. You just have to stay a step ahead of it.

CoStar News – Article – As Investors Shift Focus CRE Sales Volume Falls Off

Commercial Real Estate, NNN Property, Triple Net Retail

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