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Investors spent much of 2011 crowding into top-tier cities in search of the perfect distressed opportunity. And although prime assets continue to draw significant interest, many investors are turning to the often-overlooked secondary and tertiary locations, despite turbulence in the global financial markets and worries surrounding the eurozone debt crisis. Those lower-tier markets, experts say, can offer surprising opportunities in both pricing and asset quality.

Moving toward the mid-part of 2011, investors began to shift their focus from the core, well-located primary assets—where cap rates had dropped to the low 5s and 4s in the best markets—to more secondary markets or assets with more fundamental risk, explains New York City-based Jay Koster, Jones Lang LaSalle’s Americas capital markets president. “However, given the recent worldwide market volatility, investors’ overall desire for risk has become muted and they remain very price-sensitive for any additional market or fundamental risk they are undertaking outside of those prime markets.”

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