In Insights

By Steve Bergsman

Atlanta-based Portman Holdings has been developing projects in the cities of Atlanta, Charlotte, Denver and San Diego. The company was also part of one of the final teams vying for a redevelopment project in Miami. John Portman IV, vice president of capital markets for the company, calls some of these markets Tier 1.5 cities. In Portman’s view, Tier 1 cities are the big three, New York City, San Francisco and Washington, D.C., but there are a new group of cities that he calls “emerging hubs of diversifying economies.”

The new term Tier 1.5 is needed, he contends, because Tier 1 and Tier 2 are too far apart. Tier 1.5 economies are increasingly diversified, and one can make a strong case to institutional investors that their capital will earn good returns and their investments will trade in a profitable manner. Tier 2 cities are close but not necessarily build-and-hold markets.

True Tier 1.5 cities include such metros as Chicago, Houston, Los Angeles and Miami. The Tier 2 appellation is not universal to everything else, but only to those “emerging hub” cities such as Austin, Charlotte, Dallas, Denver, Phoenix, San Diego and Seattle. These are the cities that Portman likes.

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