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CRE Investors Are Giving Secondary Markets A Second Look

October 9, 2014

Commercial real estate office space is in high demand in core markets, driven by aggressively growing sectors, such as tech, energy and healthcare. These Class A buildings are hovering around an all time low for vacancy rates, which is pushing commercial real estate investors to look for opportunities in new markets.

As office vacancy rates are continuing to drop, quarter over quarter. Investors are approaching their portfolio strategy with renewed interest in buildings that even a year ago were deemed higher risk.

“The economy continues to recover and is fueling new job growth in many markets. As a result, we believe there exists a strong risk-adjusted opportunity to acquire and reposition existing office buildings and the fund is well-positioned to competitively pursue these opportunities,” said Vince Costantini, CEO of The Roseview Group, in a recent interview with CoStar.

Investors are re-evaluating multiple-tenant office space in these secondary markets with plans to restructure management and renovate to reduce vacancy and become more profitable. In a recent deal to acquire three Class A properties, Parkway Properties purchased a 22-building portfolio with an average vacancy in the low to mid 30% range.

“The assets are currently well below market occupancy, and we believe we can leverage our existing regional operating platform to add value to the assets and replicate our recent leasing success within the Westshore submarket,” said James R. Heistand, president and CEO of Parkway Properties.

Demand in the secondary markets will remain strong, as a result of a strengthening economy, projected job growth and business-friendly environment. Talk to our Office Brokerage Team about purchasing or leasing commercial real estate office space in the Midwest.