Rent Market Expected to See Growth in Secondary Markets

[Corey Dutton]

Secondary markets such as Houston, Denver, Nashville, and Austin, Texas are expected to see growth in rents in 2014, by more than 4%, according to a recent article in National Real Estate Investor Online. According to Brad Doremus as senior analyst with Reis this anticipated growth is largely related to the fact that many of the economies in these secondary markets are dependent on rapidly growing industries such as tech and energy. Because many bank lenders prefer to lend on Class A properties in top tier markets, bridge lenders will follow real estate investors into secondary markets this year to finance new acquisitions.

(Source: NREIOnline.com: http://nreionline.com/multifamily/secondary-markets-experience-accelerated-rent-growth-2014?NL=NREI-11&Issue=NREI-11_20140607_NREI-11_729&[email protected]&YM_MID=1470202&sfvc4enews=42&cl=article_3 )

Posted by Corey Curwick Dutton

[Jon Klaus]

Originally posted by @Gautam Venkatesan:

Just curious, what criteria is used to determine if an area is considered a secondary rental market?

 From an article by Les Shaver:

Does anyone really have a handle on what primary, secondary, and tertiary markets are?

Everybody talks about primary, secondary, and tertiary markets and major MSAs and so forth. Quite frankly, no one has come up with an exact formula to define them. They're a little bit fuzzy. Most of us have a sense of what these markets are, [but] they vary based on different criteria.

Are there any general rules of thumb?

Generally, it's volume of sales, transaction volume amount, and population, among other things. A primary market has 5 million or more people. A secondary market has 2 million to 5 million people. And a tertiary market is under 2 million people. But you have to look at a number of different factors. You can't apply [ just] one factor and be able to get there.

For example, Detroit has a population of more than 5 million, but it's considered a secondary market because investment activity there is on the low side, particularly over the last couple of years. Austin, [Texas], on the other hand, has a population of under 2 million, which would classify it as a tertiary market, but generally the investment activity there is much greater and more emblematic of a larger primary market.

Defining the Market