LOUISVILLE—Investors looking for affordable deals that also promise solid returns have increasingly glanced toward secondary markets and away from the expensive commercial real estate markets in New York, Seattle and other coastal cities. For example, officials from EnTrust Realty Advisors, LLC, a suburban Chicago affiliate of the Alter Group, have just completed the sale of three office buildings totaling 97,500-square-feet at Eastpoint Centre in Louisville, and say national-level investors showed interest in the small complex.
“It definitely hit their radar,” says Scott Latter, a senior associate at EnTrust. Although the buildings--13400, 13405, and 13425 Eastpoint Centre Dr. – were purchased by 2600 Eastpoint Phase II Development, LLC, a local private investment group, “we had interest from firms in New York, Pittsburgh and Charlotte.” The exact terms of the deal were not disclosed. EnTrust represented the seller, the Alter Group.
The sale includes 3.7 acres of vacant land for future development, Latter adds, one of the many attractions that brought outside interest. Furthermore, the complex sits in the 593-acre Eastpoint Business Center about 15 miles north of Louisville's downtown, and the modern office developments in the area don't wallow in the doldrums like many in the suburbs of other metropolitan areas.
“It's kind of the opposite in Louisville,” Latter says. Louisville's suburbs have been outpacing its downtown area with overall vacancy rates at 13.1% and a class A rate of 8.1%. Eastpoint Centre has leased 88% of its space to major tenants such as Enterprise Rent-a-car, Rockwell Automation, Pilgrim's Corp., and Gerdau Ameristeel US, Inc.
In November, the Urban Land Institute and PwC released the 35th edition of Emerging Trends in Real Estate, a joint publication based on interviews and surveys they did with over 1,000 professionals. As reported in GlobeSt.com, these researchers believe that in 2014 investors will increasingly drive growth in secondary markets since higher yields will be increasingly difficult to find in the core cities that so far have been the focus of the recovery.
“The anticipated interest in secondary markets is indicative of how the US real estate recovery is expanding beyond the traditional investment hubs,” said ULI Chief Executive Officer Patrick L. Phillips at the time. “Access to greater amounts of both debt and equity financing, combined with a sustained improvement in the underlying economic fundamentals, means that the opportunities and returns offered in smaller markets are potentially very appealing.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
