What Markets Outside the Core Offer the Best ROI?

Posner Commons, a 630,000 square foot regional shopping center in Davenport, FL.

ORLANDO—With competition and pricing at astronomical levels in core markets across the country—and with no signs that demand will slow—even the most conservative players are looking at secondary and tertiary markets for yield. Consider the following: Every major property sector has eclipsed peaks of 2007, according to USAA Real Estate Co.

While the turbulence of the global financial crisis in 2008 drove investors into the safety of core markets, the recent calm is now driving them to venture outside the core, suggests Morgan Stanley’s report, “The Odyssey.” With persistently low US Treasury yields, historically low near-term volatility in commercial real estate returns and low capitalization rates in primary markets, according to Morgan Stanley analysts, investors are hearing the faint sound of a beautiful song of higher yields coming from non-core markets.