November 11, 2013 by Brian Rogal- Chicago,


CHICAGO—The Urban Land Institute and PwC released the 35th edition of Emerging Trends in Real Estate, a joint publication based on interviews and surveys they did with over 1,000 professionals, during last week’s ULI Fall Meeting in Chicago. As reported in last week, one of the findings was that the US real estate recovery will continue and strengthen in 2014. The researchers also believe that in 2014 investors will increasingly drive growth in secondary markets since higher yields will be increasingly difficult to find in the core cities that so far have been the focus of the recovery.


Last week, reported on a presentation at ULI’s Fall Meeting by Tadd M. Millar, the CEO of Indianapolis-based Milhaus Development, who explained that these smaller metro areas provided investors with more stability since they did not typically include the “huge highs or huge lows” of many core areas.


“2014 may be the year that many investors who have traditionally focused mainly on large established markets such as Boston, Chicago, Los Angeles, New York City, San Francisco and Washington, will be expanding their focus to other cities in order to protect capital,” the researchers note. Washington, DC, in particular, has fallen out of favor, slipping from eighth place in the 2013 report to 22nd in the 2014 investment rankings. By contrast, market fundamentals should continue improving in the secondary markets, those surveyed believe, making them more likely to meet investors’ risk/return metrics.


“The movement into secondary markets is underpinned by the anticipated increase in both debt and equity capital during 2014,” the researchers further note. “Respondents were particularly positive about the prospects for equity capital from foreign investors, institutional investors and private equity funds, as well as debt from insurance companies, mezzanine lenders, and issuers of commercial mortgage-backed securities.”


“The anticipated interest in secondary markets is indicative of how the U.S. real estate recovery is expanding beyond the traditional investment hubs,” says ULI Chief Executive Officer Patrick L. Phillips. “Access to greater amounts of both debt and equity financing, combined with a sustained improvement in the underlying economic fundamentals, means that the opportunities and returns offered in smaller markets are potentially very appealing.”