- May 1, 2014: Vol. 26, Number 5

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Gateway vs. non-gateway: Investors are spreading capital to more U.S. cities and rethinking what constitutes a first- or second-tier market

by Steve Bergsman

The problem with the phrase “gateway cities” is that it is just too restrictive. Generally, it means the core cities where foreign sources of capital are most likely to invest in commercial real estate. Office space drives the gateway definition because international investors look to this sector first for investment opportunities. It is a commercial real estate type they know in their home markets, so it is a product well understood. In addition, office has the size and scale that meet foreign capital needs, including the ability to invest big chunks of monies efficiently.

The narrowest interpretation of a gateway city includes just three U.S. metros: New York City, San Francisco and Washington, D.C. Even in a more liberal consideration of the phrase, the number of U.S. cities making the cut is only six, with Boston, Chicago and Los Angeles being added.

That means every other city in the country is a non-gateway metro, which does not really make a lot of sense, so

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