Major investment opportunities in office assets currently exist in the nation’s leading secondary cities where there is little transaction volume or buyer appetite. In these cities, leading buildings can be acquired for “reasonable” capitalization rates of 8% or better, as compared to the aggressive rates of 6% and below seen in select cities such as New York and San Francisco.

A cyclical downturn in commercial real estate enables a fundamental value investor to acquire assets at sensible valuations. The hard economic times are exposing those owners who overpaid for assets, lack the acumen to adequately manage the asset, and are in financial trouble. Many lack the capital to fund the requisite tenant improvements and brokerage fees to increase occupancies.

Target secondary cities that have one or more of the following attributes: A) economic growth potential; B) venture capital investments; C) high profit-margin industries and S&P 500 companies in the tenant base; D) elite educational institutions, E) existing or expanding public transportation, F) global trade route presence; and G) barriers to new construction. Notably, these attributes are key features of the few office investment markets that have witnessed a rebound in valuations.