Secondary Markets Reemerge – Show Higher Phase I ESA Growth Moving Into 2013

After a year that saw slight to moderate growth, some secondary metros emerged stronger in the 2012 compared to others. Leading the top Phase I ESA growth metros for 2012 were Hartford (40%), Orange County (39%) and Austin (31%). Other Texas metros that made the top 20 for the year were San Antonio (30%) and Houston (22%), with Dallas narrowly missing the top 20 at 20% growth from 2011 to 2012. Dallas and Houston also made Real Capital Analytics’ top 10 list for most active markets for property deals at $7.6B and $6.9B, respectively. Notably, Houston, San Antonio, Austin and Dallas were also four out of the top five that PriceWaterhouse Coopers reported as having the highest job growth from 2007-2013.


The majority of the top 20 Phase I ESA growth metros for 2012 also performed well in the fourth quarter of the year, as many areas battled through the summer lull and political and economic uncertainty leading up to the presidential election. Notably, Norfolk (38%), Hartford (31%) and Houston (28%) had better than average 4Q12 growth, as well as some other secondary metros that did not make the top 20 for 2012, including the top metro, Las Vegas, which saw a significant 77% growth in Phase I ESA activity from 3Q12 to 4Q12. Phoenix (45%) and Fort Lauderdale (44%) rounded out the top three growth metros in 4Q vs 3Q, particularly interesting, as those two secondary metros were hot spots, mentioned by commercial real estate investors, as great prospects for development at a real estate conference attended by EDR Insight in April 2012.

Compared to the top 2011 metros for Phase I growth, those listed in the graphic above for 2012 include many more secondary and post-secondary markets (Honolulu, Cleveland, Pittsburgh, and Salt Lake City) as work has slowly started to return to these areas throughout the past year. While 2011 leading metros were predominately primary, gateway markets (Boston, New York, Los Angeles, San Francisco), the leaderboard in 2012 shows a reemergence of smaller markets that, according to PriceWaterhouse Coopers, should expect to see even more growth in 2013 as they continue to climb out of the recession and as lending, development and capital investing return to the market. The U.S. average for Phase I ESA growth increased 9 percentage points from 7% in 2011 to 16% in 2012.