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Secondary markets try harder and win in real estate market

Numbers from recent business statistics show that secondary cities and rents are rising to meet the higher costs of living in the largest metropolitan areas in the U.S. Cities like Baltimore, Maryland, could benefit from these economic boons, according to experts in the real estate field.

About one-third of real estate transactions have occurred in the so-called secondary cities throughout the nation in 2012. Tertiary markets are also considered in that number. In addition, those markets have seen rises in capitalization rates, which show a modified yield calculation for profit.

Across the country, real estate sellers say they have seen a significant increase in the number of properties that are being sold in the smaller markets. The 1 percent rise in smaller market sales could herald a financial benefit for those areas on the order of $48 million, according to financial experts. More affluent neighborhoods are also benefitting, though, including Manhattan. There, some big-ticket properties could lead to profits of more than $70 billion for the 2012 year.

Even though secondary and tertiary markets are experiencing success, analysts say that primary markets are also thriving under more palatable economic conditions. Rental rates may change as a result of these increased financial benefits.

The economy is clearly in an upswing, according to financial gurus, because banks are still choosing to issue commercial mortgages. Securities related to those mortgages accounted for more than $6.9 billion during recent months. That is the highest amount since December 2007, when the recession had just taken hold.

Most importantly, according to financial advisers, is the uptick in sales that could signal an economy that is truly recovering. That is good news for all manner of business, but it is especially important for the commercial real estate market, which had tanked during the recent financial hardships.

Source: Crain's New York, "Investors have yen for real estate," Ali Elkin, Oct. 8, 2012

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