What are the major overlooked markets currently?
What markets do you believe are currently undervalued? I would love to hear people's opinions on whats the next hot market- something along the likes of Nashville, a market that was overlooked in the last 10 years or so but has been on fire recently. As well reasons you are bullish on that market.
I think if LA would develop a better infrastructure and allow higher density, it could really increase the popularity.
Omaha, Boise, Raleigh/Durham. and Salt Lake City.
Strong population growth, friendly business environment, access to nature, and relatively low COL (though Boise is climbing fast).
First time hearing Omaha - what am I missing?
Below will give you a flavor for what is going on. The city is very highly ranked in terms of CoL, quality of life, best places to raise a family, best place to start a career, etc... Unemployment is ridiculously low, crime is substantially lower than peers, and the economy/job market is stable and diverse. Also, NE pensions are 90%+ funded.
https://rebusinessonline.com/omaha-undergoing-remarkable-downtown-trans…
https://www.omaha.com/money/the-problem-with-omaha-s-low-unemployment-r…
https://www.omaha.com/money/omaha-s-low-cost-of-living-was-once-its-eco…
https://www.bloomberg.com/graphics/2018-state-pension-funding-ratios/
El Paso for industrial. It has the highest rent growth in the nation currently, practically zero vacancy in functional buildings, and nobody is building new product.
Interesting - do you know of any developers sizing up opportunities there?
I’m personally not aware of any, nor have I seen any OMs for new product in El Paso, but there is zero supply and it is driving rents through the roof. We’re moving tenants like 20%-30% on expiring rents on leases that were done in 2014. CBRE just posted an article the other day about the market and the growing opportunity there. I think you could easily clear 150 bps of spread on an industrial development in El Paso.
http://www.cbre.us/people-and-offices/corporate-offices/el-paso/el-paso…
Are y'all developers?
No, we’re a REPE that focuses on core-plus/value-add industrial. We focus primarily on class-B infill product in which we can move the unlevered yield 100-150 bps in 3-5 years. Our business model is to strategically aggregate properties in close-ended funds to $1BN - $1.5BN in AUM, and then dispose of them as a portfolio to larger groups such as Blackstone, TPG, etc. Part of our strategy is to mix in some secondary/tertiary markets to gain exposure to higher yield. Our thought process (which has proven successful) is that if we are careful not to overweight the portfolio with non-primary markets, we can capture tremendous value on those higher yield properties we acquire outside of primary markets when we dispose of the entire portfolio.
Nashville was 100% not overlooked over the last 10 years
Agreed, particularly for hospitality.
I'm starting to think that it's overbuilt. A boom town if I ever saw one. Gonna be interesting once the recession hits.
Kansas City, MO
KC is a solid town. The Plaza is still my favourite area in KC. the downside with KC is how spread out it is. Overland Park is a 30-minute drive from downtown and somehow it is apart of the KC pulse.
KC is also very stable, much lower property value drawdown % wise compared to the US through the recession.
Richmond, VA
Prescott, AZ
I think to become an up and coming city, you have to have a killer airport with direct flights, otherwise living there is a hassle. Minneapolis has my vote. Great airport, great public trans, and great ars scene.
You could make an argument for Buffalo, but it still has a long way to go. It would be a risky gamble to get in now, but there are signs that it is up-and-coming.
More people and businesses are moving into the city, the population has stabilized after declining for 50+ years. New apartment buildings are popping up downtown, houses in run-down neighborhoods are being snapped up and renovated.
It is no SLC, Boise, etc, but with low COL, expanding airport, access to big cities like Toronto, quick flights to other major metros, and a big waterfront that makes it feel less isolated than a typical non-coastal city.
The job market is still the biggest hurdle. Healthcare and banking are growing, technology is slowly catching up (still not even a drop in the bucket compared to other cities). The city also has a major perception problem, most people think it's covered in snow all year when its climate isn't much different than any other Northeast city. Most people who actually live and work in Buffalo love it.
I initially thought Buffalo as well, but if you look at the general population trends young professionals/new families are moving to warmer climates with a better cost of living. Buffalo checks one of these boxes, but not many people are able to handle the brutally long and tundra-like winter.
You've got a good point, weather is a big hurdle to overcome. It seems that if young professionals are going to sacrifice some "big city" living, part of the return usually needs to include better weather.
I don't personally believe it's an insurmountable hurdle for Great Lakes cities, but it makes the job market that much more important in attracting young talent.
There is a massive brain drain from Buffalo to the sun belt. Everybody I went to high school with who was smart has since moved south.
OKC
Reno, NV
Another argument could be that these cities aren't overlooked, but rather we're just late cycle and businesses/people are moving out of gateways cities to second tier geographies. When things turn (see 99 and 07), business will retrench and job growth could slow in these markets as well as the favorable demographics/growth rates. Not saying I believe it, but there is some precedent.
St. Pete for sure.
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