Secondary Markets, Like the Triad’s, Are Hot

From the May 27, 2015 Wall Street Journal we learn that secondary and tertiary cities are the new belles of the ball in the multifamily sector:

As prices for multifamily properties in big cities escalate, some investors are setting their sights on smaller markets where prices are lower and yields are higher…

According to New York-based data firm Real Capital Analytics Inc., the average national cap rate for multifamily properties for the 12 months ended in March was 4.92% for the six primary markets such as New York or Chicago; 6.41% for secondary markets such as Houston and Philadelphia and 7.09% for tertiary markets such as Birmingham, Ala. or Buffalo, N.Y…

Large investors tend to favor primary markets in part because they have a firm employment base that expands during times of economic growth, boosting demand for rental housing. But as the economic recovery broadens, job growth is expanding to smaller markets.

That trend, in turn, is making investors more comfortable with the idea of entering less popular markets. According to brokerage Marcus & Millichap, three years ago over 60% of apartment acquisition capital was going to primary markets. Today, that share has fallen below 50%. Marcus & Millichap recently brokered the sale of 30 West Apartments, a 264-unit project in Bradenton, Fla., a tertiary market, for $25 million.

After watching our neighbors to the south (Charlotte) and east (Raleigh) gettingĀ most of the dances it looks like we here in the Piedmont Triad are finally going to get our share.