The Role of Market Size and Type in the Commercial Real Estate Prices

Are commercial real estate prices after the Great Recession recovering differently in primary markets as compared to smaller markets after controlling for relevant differences between properties? The question tested a long-time theory in the commercial real estate market (CRE) by examining the price recovery of properties in primary and secondary markets, controlling for other differences in property and market characteristics. The research dealt specifically with the recent Great Recession, which offered the unique opportunity to observe a protracted price recovery after a steep fall in commercial real estate prices. The research focuses on early 2010 to the end of 2012, which featured two years of a steady price recovery. After testing the relationship between market type and price recovery, explanations can be offered for why market type is or is not important. The study casts light on investor bias and suggests opportunities to capitalize on it. If anecdotal evidence holds true, it stands to reaffirm the case to invest in secondary and tertiary markets.