For years, commercial real estate conversations treated gateway markets as the default and everything else as a compromise. That framing is outdated. The more useful question is not whether a market is primary, secondary, or tertiary. The better question is whether the market has durable demand drivers, executable sites, realistic exit liquidity, and the right local operating infrastructure.
That distinction matters because investors are moving back into a market where selectivity is everything. CBRE’s 2026 U.S. Real Estate Market Outlook expects investment activity to recover, but also makes clear that returns will be income-driven and that asset selection and management will be decisive. That is exactly where smaller, high-growth markets can be attractive – and dangerous.
THE UPSIDE IS OBVIOUS: Lower basis, faster population or job growth in select regions, less institutional competition, and the ability to solve real estate needs that national platforms often ignore. THE RISK IS EQUALLY REAL: thinner comparable sales data, fewer qualified vendors, limited contractor depth, entitlement nuance, infrastructure gaps, and operational assumptions that do not survive contact with the market.
The mistake is underwriting a secondary market with a spreadsheet built for a gateway market. A generic rent comp set does not tell you whether a local employer is expanding or quietly pulling back. A population growth chart does not tell you whether workers can afford to live near the site. A traffic count does not tell you whether access works for truck movement, hotel guests, multifamily residents, or emergency maintenance. A cap rate does not tell you who will manage the asset on Tuesday morning after the deal closes.
A STRONGER FRAMEWORK STARTS WITH FIVE QUESTIONS:
FIRST: What is the market’s real demand engine? Is growth driven by one employer, one commodity cycle, one university, one airport, one hospital system, one military installation,n or a diversified base of activity? Concentrated demand is not automatically bad, but it has to be priced and structured differently than diversified demand.
SECOND: What does the labor market make possible? Industrial, hospitality, healthcare, multifamily, and energy-related projects all depend on workforce availability. The strongest site on paper can underperform if employers, tenants, or operators cannot staff it.
THIRD: What is the execution environment? Entitlements, utilities, construction labor, procurement, and local political dynamics can make or break the basis. This is where project management and brokerage intelligence should be involved before a site is controlled, not after.
FOURTH: What is the management plan? In smaller markets, operational quality often creates the spread. Tenant retention, maintenance response, capital planning, and local vendor relationships can protect NOI when the broader market gets choppy.
FIFTH: What is the exit story? The fact that a market is growing does not guarantee liquidity. Buyers need to know who the next buyer is likely to be, what debt assumptions they will use, and what operating history they will demand.
This is why boots-on-the-ground brokerage and consulting matter. GOOD BROKERAGE IS NOT JUST ACCESS TO LISTINGS. IT IS PATTERN RECOGNITION: Which corridors are improving, which owners are realistic, which sites have hidden friction, which tenants are expanding, which submarkets are overpromoted, and where demand is quietly forming.
ERES Companies has built its platform around commercial real estate solutions in high-growth markets, including those that many larger firms consider too specialized or too remote. That structure matters because successful execution in these markets is rarely one-dimensional. Site selection touches brokerage. Underwriting touches consulting. Development touches project management and construction. Stabilization touches asset services.
THE TAKEAWAY IS SIMPLE: Secondary and tertiary markets are not lesser markets. They are less forgiving of lazy assumptions. When the underwriting is local, disciplined, and execution-aware, these markets can produce opportunities that are difficult to replicate in crowded gateway markets. When the underwriting is generic, they can punish investors quickly.
The next cycle will not reward investors for chasing growth headlines. It will reward the teams that can identify durable demand, control execution risk,k and operate the asset after closing.