A new report released today by the NAIOP Research Foundation suggests that commercial real estate investment and sales activity could begin to pick up in the coming year in many of America’s medium-sized metropolitan areas (so-called “secondary markets”). Based on healing economic conditions, improving investor confidence and the availability of financing, the report forecasts a general rebound in an industry that contributes billions of dollars to local revenues and helps support thousands of local jobs. A complete list of the metro areas appears at the end of this article.
“The economy is recovering, and we’ve seen an increase in commercial real estate sales, leasing and development activity in primary markets like New York, Miami and Los Angeles. If this report and history are a guide, we will likely see this trend start to take hold in secondary markets; in places like Columbus, Kansas City, Tampa Bay, Austin and other medium size metropolitan areas. If that happens, it will be a real positive sign that our industry is feeling better about the economy and investment opportunities, and it will be good news for lots of medium-sized American cities. One cloud on the horizon is whether the Congress will renew an important tool that’s needed for this investment to happen, which is insurance against terrorist attacks on commercial properties,” said Thomas Bisacquino, President and CEO of NAIOP, the Commercial Real Estate Development Association.
The report, authored by Sam Chandan, president and chief economist with Chandan Economics in New York, is full of interesting information and statistics about a host of U.S. cities and is an excellent reference document for economic and business writers alike.
While the continued availability of financing and low yields on bonds has sparked lender and investor interest, the fiscal health of a city plays a much greater role in medium-sized market growth compared to large metropolitan areas. Local governments with weak long-term budget positions and large unfunded pension liabilities can chill investor interest in a city.
The report also warns investors to watch out for the “one-industry town,” saying a diverse job market is essential for growth of medium-sized markets. Despite a falling unemployment rate, the need for a large number of diversified, skilled workers in a city with a history of innovation is key for investors who are motivated by a market’s long-term prospect for growth.
Since recovery in medium-sized markets lags the pace of larger cities, the continued growth in the commercial real estate sector and historic trends means 2014 could be very positive in many communities.
The Emerging Metros
Austin-Round Rock-San Marcos, TX
Baltimore-Towson, MD
Charlotte-Gaston-Rock Hill, NC-SC
Cincinnati-Middletown, OH-KY-IN
Cleveland-Elyria-Mentor, OH
Columbus, OH
Detroit-Warren-Livonia, MI
Greensboro-High Point, NC
Hartford-West Hartford-East Hartford, CT
Indianapolis-Carmel, IN
Jacksonville, FL
Kansas City, MO-KS
Las Vegas-Paradise, NV
Louisville-Jefferson County, KY-IN
Memphis, TN-MS-AR
Milwaukee-Waukesha-West Allis, WI
Minneapolis-St. Paul-Bloomington, MN-WI\
Nashville-Davidson-
New Orleans-Metairie-Kenner, LA
Oklahoma City, OK
Orlando-Kissimmee-Sanford, FL
Philadelphia-Camden-
Phoenix-Mesa-Glendale, AZ
Pittsburgh, PA
Portland-Vancouver-Hillsboro, OR-WA
Providence-New Bedford-Fall River, RI-MA
Raleigh-Cary, NC
Sacramento-Arden-Arcade-
Salt Lake City, UT
San Antonio-New Braunfels, TX
St. Louis, MO-IL
Tampa-St. Petersburg-Clearwater, FL
Virginia Beach-Norfolk-Newport News, VA-NC
About the Report
This report is an overview of the secondary market investment landscape. The report surveys patterns of market performance and relationships can inform investors’ evaluations of market opportunities in secondary markets.
About the NAIOP Research Foundation: The NAIOP Research Foundation was established in 2000 as a 501(c)(3) organization to support the work of individuals and organizations engaged in real estate development, investment and operations. The Foundation’s core purpose is to provide these individuals and organizations with the highest level of research information on how real properties, especially office, industrial, retail and mixed-use properties, impact and benefit communities throughout North America. For more information on how to contribute or for complimentary research reports, visitwww.naioprf.org.
About NAIOP: NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial, retail and mixed-use real estate. NAIOP comprises 15,000 members in North America.NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visit www.naiop.org.
