Cushman & Wakefield/NorthMarq reports commercial real estate investors are realizing higher yields in second-tier markets than in the more expensive first-tier markets, like New York or Los Angeles. Cap rates for property in San Francisco, for example, are roughly 3.5 percent, compared with 6 percent in Minneapolis/St. Paul, Minnesota. No wonder Goldman Sachs recently bought the 1910 Tractor Works Building in Minneapolis for $54.8 million, that six years earlier had sold for $26.8 million. Connecticut-based Greenfield Partners recently paid $67.5 million for a portfolio of eight Minneapolis/St. Paul office/flex industrial properties. A German limited liability capital investment company is about to pay $164.5 million for a downtown property whose main tenant is Target Corp. The Financial Crisis hit hardest on the coasts and it appears the lesson learned is – diversify – because it’s not only how much you can make, but how much you can lose.
August 13, 2014