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NEW YORK CITY-Buyers of office buildings who banked on the world’s top markets are wondering if some secondary markets offer better returns, according to a new study by Real Capital Analytics. The December report by the New York City-based research firm follows on the heels of a study in November that revealed that sales of office buildings in the US dipped to $13.4 billion in the third quarter, the lowest quarterly total since early 2004.

In the new study, RCA sets the stage by pointing out that, With the capital markets turned upside down, investors are now rethinking their strategies.” One of the questions they are asking in the reevaluations is what are the benefits and risks of the primary markets versus other markets in the same country.

Primary cities like New York City, Los Angeles, Chicago and the like—as well as places like Tokyo, London and Paris—in general “have significant exposure to the hard-hit financial sector,” the RCA report notes. Investors often prefer primary markets because they offer greater liquidity in the sense that buildings there are historically easier to trade, but those primary markets “are also likely to be more volatile in this downturn,” the RCA report states. It explains that prices grew faster in the major markets than they did in secondary cities in the recent boom years, but that means “greater room to fall” in the primary markets.

Office building prices in secondary cities worldwide are half of those in primary markets on the basis of price per square foot, the Real Capital Analytics report discovered. In the US, the secondary-city prices are slightly greater, while in some countries, such as Australia, the secondary-city buildings trade for slightly less than half the cost per square foot of primary-city properties.

The RCA study looked at six countries and found that, for those lower prices, investors reap considerably different yields for their investments in secondary cities. The greatest difference was in France and the UK, where secondary markets produced yields that were 84 basis points and 74 basis points higher than yields in the primary cities of those countries. In the US, secondary markets produced yields of 62 basis points higher than primary markets like New York City. In Australia the secondary markets generated returns of only 17 basis points higher than primary cities. The other two countries studied were Japan and the Netherlands, where the yields were 67 and 34 basis points higher, respectively, in secondary markets.

The RCA study also looks at a possible change in outlook on the part of office investors, who have traditionally favored buildings with large, creditworthy anchor tenants. “If the last few months have proved anything for property investors, it is that no tenant is a sure bet anymore,” the RCA study states. Nowadays and going forward, it concludes, office building owners may be more comfortable spreading risk among many individual rent-paying tenants versus the traditional anchor tenant mentality.

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