As most real estate markets are either in or heading for a downturn, all eyes are focused on the capital markets. After all, capital markets move first. But that gets everyone thinking each downturn is the same. They’re not; each downturn is unique in its own way. And that speaks to the opportunity sets that arise in times like these. Sure, it’s easy to say, “Buy the fundamentals” — but which sectors? Over what period? At what price?

Faced with heightened economic uncertainty, investors will be well served by focusing on markets that offer high long-term rental growth rather than overvaluing potential short-term growth that is increasingly at risk. While recent capital flows have been out of gateway markets and into Sun Belt markets, we have evidence that the ideal combination is a subset of both of these broader categories.

What factors should investors consider in assessing long-term growth potential? Our research finds that metropolitan areas with strong h