ULI Panel: Secondary Is in First

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At the Urban Land Institute (ULI) fall meeting at the Los Angeles Convention Center on Tuesday, there was a big embrace of the Sun Belt as well as smaller, secondary markets. 

ULI compiled data from the top U.S. real estate markets and found that the hottest investment market was Nashville, with incredible concentration in the Sun Belt. Notably absent from the list of top markets were New York, Los Angeles and Chicago.

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Among the other cities that ULI highlighted were San Diego, Phoenix, Atlanta, Raleigh, and Boston. Texas was the big state winner with three cities in the top 10: San Antonio, Dallas/Fort Worth, and Austin.

“There’s been a lot of excitement about smaller cities and the amount of growth,” said MetLife’s Sara Queen on one of the ULI’s morning panels. “It’s an exciting, compelling story — but you have to really pick the asset.”

“Those markets are not surprising,” said Andrew Yoon of BGO. “There’s a lot of capital chasing there.” However, Yoon warned, it’s still critical that purchases be “very detail-oriented, on the ground, dissecting why one asset is better than the next.” 

Absent from the top 10 list was Florida, which since COVID has been the center of a tremendous amount of development.

Of course, panelists warned the market trends toward the Sun Belt and secondary markets should not be devoid of nuance. “I’ve always said we’re not in the real estate business, we’re in the demographics and labor business,” said CBRE (CBRE)’s Spencer Levy. “In Boston I love the Seaport — I have concerns about the financial district. I love L.A — but I have concerns about downtown.”

Despite this, Levy couldn’t mask his interest in some of the secondary markets.

“Boise — I had never been before,” Levy said. “This year I’ve been three times. I looked at the trends and it reminded me of Nashville 15 years ago.”

Max Gross can be reached at mgross@commercialobserver.com