July 25, 2017
Tertiary markets in Texas have been heating up as investors try to obtain more yield for their dollars. Jonathan Krebbs, Sperry Van Ness Investment Sales Group’s Executive Director will be part of a panel at the upcoming Connect Texas Multifamily Conference in Dallas, which will discuss tertiary market investments. Connect Media caught up with him to learn more about these markets.
Q. How do tertiary markets in Texas differ?
A. There are differences. Out in West Texas, in Midland and Odessa, the price of oil and the demand for apartments from workers were huge in 2013 and 2014, and pushed rents and multifamily pricing to incredible levels. Trades in Midland and Odessa today are few and far between. Those are markets we would expect to see come back with the price of oil. Some contrary investors are out there looking for deals. The farther out you get from a metropolitan area, the more attractive the returns need to be to draw investors. There seems to be more interest in Tyler and Longview than their West Texas counterparts, and we see more transactions in those markets, possibly because of their proximity to the (Dallas-Fort Worth) Metroplex.
(Editor’s Note: Tyler is approximately 1.5-2 hours from DFW. Longview is approximately 2-2.5 hours away from the Metroplex. Midland-Odessa is approximately 3-4 hours away).
Q. Are you seeing more investors looking at tertiary market multifamily?
A. Absolutely. We are seeing significant interest in Killeen, Amarillo and Lubbock, TX and Oklahoma City. This is because there is significant competition for properties in the major Texas markets. As a result, some long-term investors, who don’t want to stretch on pricing, are going to tertiary markets to achieve their returns.
Q. What types of investors are drawn to tertiary markets?
A. Most of what we are seeing are syndicators and some high net-worth 1031 exchange buyers. Recently, we’ve been seeing more value-add funds. Over the next 12-18 months, I think you will see more investors jumping into the tertiary space and more competition for well-located properties.
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