By Hal M. Bundrick
NEW YORK (MainStreet) Real estate is making a comeback, but for investors, the key will be looking for opportunities beyond the traditionally popular markets. And there's one real estate investment in particular that needs to be on your radar.
The "smart money" is moving to secondary markets in 2014, according to Emerging Trends in Real Estate 2014, co-published by PwC U.S. and the Urban Land Institute. Instead of New York, Los Angeles, Chicago, San Francisco and Washington, think Houston, Dallas/Fort Worth and San Jose.
Such secondary real estate markets can provide investment returns that are now harder to find in the more conventional markets where the best assets have become increasingly expensive, according to real estate pros.
"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."
Real estate investors are particularly upbeat in their view for the coming year. Only one factor looms to curb their enthusiasm: interest rate hikes -- when and how much.
"Real optimism has emerged as a key theme in the real estate market for 2014 as trends are progressing significantly through the economic and real estate recovery cycles," says Mitch Roschelle, a partner at the U.S. real estate advisory practice leader, PwC. "The steady economic recovery and job creation has created 'tailwinds' that have propelled the commercial real estate market forward, and momentum of this recovery seems powerful enough to weather spikes in interest rates that may be inevitable."