Location is the oldest cliché in real estate — and it’s a cliché because it’s true. In commercial real estate, where you buy is as important as what you buy. I’ve seen well-priced assets underperform because the market deteriorated, and I’ve seen modestly positioned deals exceed expectations because the surrounding market lifted everything. Choosing where to buy commercial property is a strategic decision that deserves serious analysis.
Here’s the framework I use with my clients.
Start With the Economic Foundation
Strong commercial real estate markets are built on strong economies. Before you commit to a market, evaluate:
- Employment growth: Growing employment drives demand for office, retail, and industrial space
- Population trends: Markets gaining residents create demand across asset classes
- Industry diversity: Markets dependent on a single employer or industry carry concentration risk
- Infrastructure investment: New transit, highways, or development signals long-term commitment to the market
I always tell my clients: follow the jobs and the people. The rest tends to follow.
Evaluate Supply and Demand Dynamics
A strong economy doesn’t automatically mean a good market for your asset class. Layer in supply and demand analysis:
- Vacancy rates: Low vacancy signals strong demand and pricing power for landlords
- Net absorption: Positive absorption means tenants are taking up more space than is being vacated
- New supply pipeline: Heavy construction can dilute occupancy and rent growth even in strong markets
- Rent trends: Rising rents confirm demand is outpacing supply
Consider Secondary and Tertiary Markets
Major metros — New York, Los Angeles, Chicago — offer liquidity and brand recognition, but they also come with premium pricing and compressed yields. In my experience, secondary and tertiary markets often offer:
- Higher cap rates and better cash-on-cash returns
- Less institutional competition for deals
- Strong local demand drivers tied to regional employment and growth
- Greater potential for value-add plays
The trade-off is lower liquidity and potentially longer hold periods. Know your exit before you enter.
Match the Market to Your Asset Class
Different asset classes thrive in different market conditions:
- Industrial: Proximity to logistics corridors, ports, rail, and major highways
- Retail: Dense population, strong household incomes, and anchor tenant demand
- Office: Employment concentration, talent pools, and transit access
- Multifamily: Population growth, job creation, and supply-constrained submarkets
Don’t evaluate a market in the abstract — evaluate it through the lens of your target asset class.
Local Knowledge Is Non-Negotiable
Markets aren’t monolithic. Within any major metro, submarket dynamics can vary dramatically. A strong city-level vacancy rate can mask a struggling submarket — and vice versa. This is why local expertise matters enormously.
I always say: you can underwrite a deal from a spreadsheet, but you can’t replace boots-on-the-ground knowledge of what’s happening at the submarket level.
My Practical Recommendation
Before committing to a market, spend time there. Meet local brokers, tour the supply, understand who the tenants are, and get a feel for the development pipeline. Pair that qualitative picture with hard data on vacancy, absorption, rent growth, and cap rate trends.
If you want help identifying the right market for your commercial property investment and the right asset within that market, I’m here. I’m Matt Bingaman, and market selection is one of the most important conversations I have with every investor I work with. Contact me today and let’s find the right market for your next deal.