Global investors continued hedging their bets in real estate, due to its role as an income- producing hard asset in an inflationary environment. The U.S. ranked as the world’s most  transparent real estate market in 2012, with the healthiest growth prospects, and historically low interest rates and government yields, making it the apple of investors’ eyes compared to  other developed nations. Urban Land Institute’s Emerging Trends in Real Estate 2013 report similarly identified the “less-expected” industrial-strong secondary markets as those drawing the interest of growth-seeking foreign investors in 2012 and into 2013. The data shows that  non-major markets—the field—may not be a ‘bad play’ moving forward. A comparison between the big six and the field in terms of macroeconomic elements reveals some strong areas for these markets. The following secondary markets were identified as the top-ranked recipients of

Global capital in 2012:

•  Houston: The energy sector has propelled this market into an investment hotbed. In 2012, a  total of 31 properties were acquired by international capital for $1.38 billion. In the year ahead, industrial, multifamily and office will reign supreme as top asset classes despite high cap rates. 
•  Inland Empire: The Inland Empire became a target market for foreign investment in 2012,  with $670 million accounting for 23 transactions. In 2013, development and demand from e-commerce are expected to increase, in addition to organic growth from companies in the region.
•  Seattle: The Seattle market continues to boom as millenials and baby boomers return to the urban core in a journey to embody the “work, live, play” lifestyle. In 2012, 28 properties traded hands to global owners for $910 million. In the next year, Seattle will see construction  reemerge as demand for office and apartment space continues full steam ahead.
•  Phoenix: The Phoenix employment sector is heating up, and in turn the real estate market is  moving toward normalcy. In 2012, a whopping 53 properties traded for a total of $890 million. In  the year ahead, the industrial sector is expected to witness occupancy gains and single digit
overall vacancy rate, while the office sector is expecting to see positive absorption in the year ahead.
•  Hawaii: With a single $760 million transaction in 2012, Hawaii joined the list as a top market for foreign investment. The Hawaii hotel market continues to rebound with astounding revenue per available room (RevPAR) growth. The year ahead is likely to witness further investment as the market gains traction bolstered by strong job growth. Perspectives April 2013 The United  States proves “land of opportunity” for foreign investors Global capital makes its way to industrial-driven secondary markets.  An increase can be expected in direct U.S. real estate investment activity this year spurred by new pension funds and sovereign wealth participants joining the investment community. Given the limited supply, and preferred choice of trophy assets, it’s probable that there will be faster and greater moves into secondary markets that are charged with growth in the technology and energy sectors.

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