Commercial Investment Real Estate March/April 2013 - Page 32

A GAME OF RISK Will investors play ball in secondary and tertiary markets? by Malcolm Davies 30 March | April | 2013 are taking advantage of record low interest rates and are searching for new investment opportunities. Overall, deals are becoming much more common and prof table for investors and lenders alike. If these real estate players are willing to look outside the safe primary markets and take a bit of a risk, there is a very successful game in which to play. Primary Market Expansion To understand secondary markets, it is important to f rst under- stand primary or gateway markets. In the past, if a lender or equity investor was asked what he or she would consider a primary or gate- way market, the answer would likely be six or seven metropolitan statistical areas: Los Angeles, San Francisco, New York, Chicago, Washington, D.C., Boston, and Dallas. Commercial Investment Real Estate E very real estate professional is well aware that commercial real estate is making a comeback. Even during the depth of the recession, the market of 2009 presented a great deal of opportunity for investors and lenders. Many of those who took advantage of the chance to buy properties at low prices are now cashing in on these investments. But where can investors and lenders achieve that kind of success in today’s market? While the caliber of reward achieved by investments in today’s market may not be as large as it was in 2009, the opportunity for prof t still exists. Lenders and investors are f nding a whole new ball game in the secondary and tertiary markets, turning prof ts that of en beat out their primary market comparables. As primary and gateway markets have become saturated with competition, savvy investors