Top Cities: Dwight Hotchkiss

CPE asked a number of investment sales brokerage executives about the cities they recommend that their clients consider. Excerpts of their responses appeared in the September 2013 Special Report. Following is the full response from Dwight Hotchkiss, President, Brokerage Services l USA, Colliers International. Be sure to read the full responses of the other executives, as well!

The markets which continue to see the greatest activity are the gateway cities along the coasts: Southern California, Northern California, Seattle, Miami, New York and Boston. Despite challenges in the Rust Belt (e.g. Detroit and Cleveland), there are several Midwest cities that have seen interest, including Chicago, Dallas and, with the booming energy sector driving it, Houston.  Phoenix is also emerging, with its recovering housing market and employment growth driving interest.

This list of cities has changed over the past year because secondary markets are starting to get more attention as investors are looking for yield. Phoenix has been added because it is a low basis/value market. In the industrial sector, markets which have seen strong Port growth have experienced an increase in or a continued growth of distribution hubs. The markets in Texas have had strong employment and as mentioned, Houston is thriving with the energy boom.

The markets that we refer to as ICEE (Intellectual Capital, Energy and Education driven) have the lowest yields, due to high demand and low availability of product. Institutional and REIT Investors are primarily focused on these key markets, and private investors are typically buying in the secondary markets. Despite the opportunity, there are risks, including the potential for NOI growth to lag behind a back-up in cap rates.