The Rise of Secondary Markets for Commercial Real Estate Investors

Why Investors Are Looking Beyond Primary Markets

For much of the past decade, primary markets like New York, Los Angeles, Chicago, and San Francisco commanded the lion’s share of institutional commercial real estate capital. That dynamic is shifting. According to NAIOP research, conditions are increasingly favorable for a move toward secondary markets, driven by improving investor risk tolerance, more stable national economic trends, and a widening yield gap between primary and secondary metros.

At the same time, industries that once clustered almost exclusively along the coasts are relocating. Job growth and new industry investment in Midwestern and Southern metros are giving investors more reasons to look beyond the usual gateway cities. NAIOP has also pointed out that secondary markets tend to carry less competition and lower barriers to entry, with some benefiting from federal programs supporting domestic manufacturing.

For investors chasing yield in an environment where primary-market pricing has compressed, secondary markets increasingly look less like a compromise and more like a genuine opportunity.

The Information Gap That Comes With Opportunity

Opportunity in secondary markets comes with a tradeoff investors need to plan for. These markets don’t receive the same institutional attention, research coverage, or transaction volume as primary metros, which means less transparent pricing data, thinner comparable sales, and fewer analysts tracking submarket-level trends.

NAIOP research on small-scale development in tertiary markets notes that these smaller markets are home to roughly half the U.S. population, yet receive comparatively little attention from institutional investors and researchers.

That data gap cuts both ways. It’s part of why secondary markets can offer less competitive bidding and more room for negotiation, but it also means an investor evaluating one of these markets can’t rely on generic national reports the way they might for a well-covered gateway city. Underwriting a secondary market well requires the kind of granular, on-the-ground intelligence that national research alone won’t surface.

What to Look for in a Secondary Market

Not every secondary market represents the same opportunity. A few criteria consistently separate the markets worth pursuing from the ones that are simply cheaper:

• Job market diversification: Markets anchored by a single employer or industry carry more downside risk than those with a broad economic base.
• Population and demographic trends: Sustained in-migration signals long-term demand; a short-term spike does not.
• Supply pipeline: A market with strong fundamentals but heavy new construction underway can quickly become oversupplied.
• Exit liquidity: Secondary markets can offer strong entry pricing, but buyer pools are typically smaller than in gateway cities, so exit strategy deserves early consideration.

Navigating Secondary Markets With the Right Partner

None of this makes secondary markets any less worth pursuing; it just means the diligence looks different. This is where SVN’s collaborative network brings a distinct advantage. With advisors across more than 200 offices nationwide, SVN’s local market knowledge extends well past the primary metros that dominate most brokerage coverage. An advisor in a secondary market isn’t relying solely on a national research report; they’re tracking local job announcements, zoning changes, and buyer activity firsthand, and sharing that intelligence across SVN’s broader network rather than keeping it siloed.

For investors weighing a move into a secondary market, that combination of local presence and national reach is often the difference between a good opportunity and a good outcome. Connect with an SVN advisor to talk through which secondary markets align with your investment strategy.