Other "tier 2" cities in the U.S. that are worthwhile to consider are Houston, Dallas, Chicago and Miami.
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What secondary markets should we be looking at?
Many Chinese investors have flocked to opportunities in New York City, Los Angeles, San Francisco, Seattle and other major markets In the U.S. We are a fund that has made its reputation from being different and not following the crowd. What secondary markets might provide better value in 2018 than the traditional tier 1 markets? What factors make a secondary market ready to yield high returns?
Answers
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You should look at high-growth areas, urban density, forward development plans and tax incentives. Markets that come to mind include Denver, Portland, Charlotte and Tampa. Note as cities expand, such as the D.C. corridor into Virginia, there will be significant opportunities in outlying cities like Herdon, Chantilly, etc.
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Explore a variety of markets and industries nationwide. A good valuation expert and accountant would be two important factors in evaluating and diversifying your portfolio into different geographical areas.
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There are a number of factors that have made some secondary U.S. market cities attractive for real estate investment. These include attracting a strong, well-educated workforce (particularly in tech or biotech fields), good transportation systems, a growing economy and strong job maker places (again, especially in tech fields) viewed as having high quality of life advantages (such as educational centers, cultural offerings, affordable quality housing options, good public school systems, great recreation accessibility and the like). Good examples are Boston, Seattle (both of which some consider gateway cities), Denver, suburban Washington, D.C., Nashville, Portland, San Diego, Austin, Dallas, Raleigh, N.C. and Charlotte, N.C. This takes some careful research and study of demographic, economic and cultural aspects to see which cities should remain magnets for innovation and economic growth as well as being attractive to well-educated college graduates.
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Please bear in mind that the advice I give here is based on what I hear in the markets. It is always important to work with people who are representing your interests. I thought you would be interested to know that a recent report by PricewaterhouseCoopers and ULI reports that the top secondary markets are Seattle, Austin and Salt Lake City. Byron Carlock, head of PwC's real estate group, reports that secondary markets will continue to elevate their status for different reasons. He views that Texas and Tennessee are tax-friendly and that investors are attracted to quality of life places like Denver, Nashville and Charleston. That is correct, but is a gross generalization. Secondary markets are the first to slow when liquidity is scarce. Work with top quality advisors and look at assets you are most comfortable with.
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• Some of the examples of smaller secondary cities in US are Seattle, Salt Lake City, Austin, Texas, and Raleigh/Durham, North Carolina. • Many sources claimed that more and more investors invest in many secondary cities in retail, and residential housing properties which benefit from the lower cost of living and strong population growth. • Tech firms are taking strong notes and signing leases in secondary markets. These locations may not be considered go-to tech centers at first, but the cheaper prices for both office and living space are creating new meccas that nobody would have predicted only a few years ago. As tech, healthcare, education and other industries move in — and mixed-use properties go up — the investment begins to look more and more stable, with the yields proving to be bigger. • Secondary Markets are showing higher yields, moderate cap rates and construction pricing below replacement costs. Seattle • Since 2010, Seattle’s job market expanded by 7%, surging ahead of the national average by 2%. • Seattle has a lot of Chinese and big tech companies HQ there such as Google, Microsoft and eBay. These large companies have been driving the property market • This is similar situation to San Jose/SF where all the tech companies are located, this lead to the massive increasing price in housing over the past few years • Amazon’s Seattle presence — with its world HQ located there — cannot be understated as a powerful magnet for tech professionals and Millennials. • The revolutionary company employs 20,000 people in 3mn sq. ft. of new space. That doesn’t include those whose local businesses have grown as a result of its presence. Charlotte, North Carolina • The secondary cities with the most investment potential satisfy these criteria, and are also attracting a young and educated demographic is Charlotte, North Carolina are showing major population growth, as people move in the U.S. from major metropolises to smaller markets at an ever-quickening pace. • Charlotte and Raleigh each get more than 100 new residents a day, Combine those positive demographic shifts with strong job growth, competitive living costs, top-notch healthcare systems and the appeal of being near intellectual capital and higher education institutions, So development of residential (student housing) and commercial properties is suitable in those area. • According to Bloomberg Brief: Real Estate, Charlotte, North Carolina, saw a 449% jump in building permits for privately owned housing with two or more units between 2010 and 2013.
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