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As a cycle matures and cap rates compress, investors typically head to secondary and even tertiary markets in search of yield. However, investors tend to return to core markets during a downturn, after prices drop and the yield potential is brighter. In the long run, although secondary markets experience growth, they still see more risk during a downturn than core markets.

“Any time there is a dip, investors go back to the core markets,” Steve Jacobs, CEO of Ten-X Commercial, tells GlobeSt.com. “When there is a dip, investors can get a better deal in Los Angeles or San Francisco. Core has always been more desirable, but as those get too expensive, they go to the next bucket, which is the sunbelt and then secondary and tertiary cities. Investors would rather buy an asset outside of Boston than outside of Detroit.”

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.

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