Beyond the typical core markets, there are key secondary and tertiary markets nationwide that offer winning strategies when it comes to multifamily development and investing. These markets perhaps aren’t as sexy as some of the top-tier core markets like San Francisco, Chicago and New York. However, during a panel discussion on core versus non-core markets during the NMHC 2014 Apartment Strategies Outlook Conference, industry executives said that the idea that it’s necessary to focus on the sexy markets to be successful is simply not the case; however, geographic diversity is vital.
Eric Bolton, chairman and chief executive officer with MAA notes that his firm’s strategy is to invest 60 percent in the larger markets and 40 percent in the secondary markets with an objective of delivering the best risk adjusted performance for capital that they can over a period of time. “Do we trade off a little of the froth when things are really hot in core markets? Yes, but the notion that we can’t go into Nashville and increase our performance is incorrect. It’s all about price point.” He added that secondary markets are where his shareholders are seeing returns.
Our focus has been on the Midwest with properties in cities that include Minneapolis, Detroit, Cleveland and Cincinnati, says Jason Koehn, chief investment officer with Village Green Companies. That’s because his firm knows not just the market, but the demographics of the market. “We know the population went to college at a Big Ten university, we know the white collar worker that’s coming out of those universities, and our job is focused on making the apartments where they want to live,” said Koehn.
Koehn also noted that Pittsburgh is another secondary market that’s growing on the development and investing side. “While many imagine a steel town with a lot of smoke, it’s actually a big beautiful city with a big beautiful workforce,” said Koehn. “Great companies, law firms and universities like Carnegie Mellon are headquartered in the metro area, making it a market that’s drawing a lot of interest.”