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.

“The three most harmful addictions are heroin, carbohydrates, and a monthly salary.” - Nassim Taleb
 

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/

 

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…

 
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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.

 

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.

 

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.

 

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.

 

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