ORLANDO—Competition is starting to heat up in non-core markets but there are still many deals to be made with 7%-plus cap rates. Investors can purchase an asset in a secondary market at a 7% to 8% cap rate, invest in renovations, actively push to bring it to full occupancy and sell for a nice profit as the market gets frothier.
“There is competition in the secondary and tertiary markets, but we can remain competitive within our buying criteria in these areas, which is harder for us in 'core' markets,” Francis Greenburger, CEO and founder of Time Equities, tells GlobeSt.com. “We're not seeing an increase in pricing. I anticipate that may change after we continue acquiring in these submarkets.”
According to Andrew Nelson, chief economist at Colliers International, cap rate compression has been far more subdued than in the gateway markets, although rising as the restrained new construction over the past several years limits quality new product for purchase.
“While Millennials have been deferring marriage and family formation, they will eventually follow their parents' path out of the CBDs to the suburbs, though a different model of suburban living,” Nelson tells GlobeSt.com. “Eighteen-hour cities and suburban areas with a vibrant 'downtown' and mass transit options will see the heaviest competition.”
Want to know what asset types to watch in secondary and tertiary markets? Check out my recent column.
ORLANDO—Competition is starting to heat up in non-core markets but there are still many deals to be made with 7%-plus cap rates. Investors can purchase an asset in a secondary market at a 7% to 8% cap rate, invest in renovations, actively push to bring it to full occupancy and sell for a nice profit as the market gets frothier.
“There is competition in the secondary and tertiary markets, but we can remain competitive within our buying criteria in these areas, which is harder for us in 'core' markets,” Francis Greenburger, CEO and founder of Time Equities, tells GlobeSt.com. “We're not seeing an increase in pricing. I anticipate that may change after we continue acquiring in these submarkets.”
According to Andrew Nelson, chief economist at Colliers International, cap rate compression has been far more subdued than in the gateway markets, although rising as the restrained new construction over the past several years limits quality new product for purchase.
“While Millennials have been deferring marriage and family formation, they will eventually follow their parents' path out of the CBDs to the suburbs, though a different model of suburban living,” Nelson tells GlobeSt.com. “Eighteen-hour cities and suburban areas with a vibrant 'downtown' and mass transit options will see the heaviest competition.”
Want to know what asset types to watch in secondary and tertiary markets? Check out my recent column.
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