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Real estate recovery in diversified cities.

Q. How would you categorize 2012?

A. Coming out of the recession the big gateway cities were the ones that performed best. That included New York, Washington, San Francisco, Boston, Chicago and Los Angeles. That's where investors were willing to take risks. You had diverse employment base, better leased buildings, less risk of a double-dip micro recession.

So that's where we were -- and 2012 was a continuation of that.

Apartments were the darling real estate subsector. But what happened in 2012 was we saw apartment cap rates get too low in some of those markets -- south of 5 percent -- and so investors were looking to invest outside apartments and outside the gateway cities. We started seeing in 2012 an interest in the office asset class, the industrial asset class, and a little bit more interest in retail.

Q. Are there regions of the country where you see future growth?

A. The other 45 markets that are covered in our investors survey look like that's where all the opportunities are -- whether it be Raleigh-Durham, N.C.; Texas markets like Austin, Houston and Dallas; Seattle; and Denver.

None of them is radically overbuilt from an office or apartment perspective. What's also interesting is those markets have a high percentage of echo boomers in their population -- the 25- to 34-year-olds. That's who's going to buy a house in the future, who's going to work in an office or retail or warehouse, or shop in retail

Mitchell Roschelle, 51, is national practice leader and a founder of the real estate advisory practice of the American unit of the accounting firm PricewaterhouseCoopers.


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