Tertiary Markets Capture Majority of CRE Deal Counts

Marcus & Millichap reports that tertiary CRE markets accounted for more than half of transaction deal counts across major property types. The data covers the 12 months through Q2 2026 and highlights a long-term shift toward smaller US metros.

The reversal has unfolded over more than a decade. Tertiary markets represented 35% of CRE deal counts in 2010, compared with 46.5% for primary markets. By 2023, tertiary markets had reached 50.2%, a level they have largely maintained. Primary markets now account for roughly 34%, according to Marcus & Millichap.

Smaller Markets Take the Lead

The shift toward tertiary CRE markets developed gradually before accelerating after 2017. Their share of transaction counts increased from 35% in 2010 to only 38% by 2017.

The following six years changed the market considerably. Tertiary locations crossed the 50% threshold as investors increasingly looked beyond traditional gateway markets.

John Chang, chief intelligence and analytics officer for research services at Marcus & Millichap, characterized the trend as a slow, steady reallocation of investment. The longevity of that movement is important. Smaller metros have maintained their gains instead of surrendering market share as pandemic-era migration patterns moderated.

The Details

The trend extends across office, retail, multifamily, and industrial properties. Since 2017, tertiary markets’ office transaction share has increased from 39% to 48%, according to Marcus & Millichap.

Single-tenant retail climbed from 48% to 58%, while multi-tenant retail increased from 41% to 52%. Industrial rose from 37% to 51%, placing all three categories above or near majority territory.

Multifamily remains below that threshold but has also shifted significantly. Tertiary markets increased their apartment transaction share from 28% to 40%.

Overall transaction counts illustrate the scale of the change. Tertiary markets recorded roughly 7,700 deals in 2010. That figure exceeded 44,000 in the latest year covered by Marcus & Millichap.

Yield Premiums Narrow

Smaller markets have historically compensated investors for greater perceived risk through higher cap rates. That yield advantage remains, but competition for tertiary assets has compressed the spread against primary markets.

Marcus & Millichap reports that the office cap rate spread was about 125 basis points before the pandemic. It has since narrowed to roughly 40 to 60 basis points.

Retail’s spread fell from approximately 80 to 40 basis points. Multifamily experienced an even larger compression, dropping from 210 basis points in 2015 to 70 basis points in 2025.

Industrial followed a different trajectory. Its spread increased from 120 basis points in 2015 to 140 basis points in 2021. It then declined to 100 basis points through Q2 2026.

Why It Matters

The shrinking yield gap indicates that investors increasingly view smaller metros as viable alternatives to traditional CRE investment centers. Buyers are accepting lower relative premiums as transaction activity deepens and the perceived risks of tertiary ownership decline.

Liquidity may be the bigger structural change. Smaller markets traditionally presented investors with concerns about limited buyer pools and uncertain exit opportunities. Rising transaction velocity helps address both issues.

Marcus & Millichap’s increase from roughly 7,700 tertiary transactions in 2010 to more than 44,000 demonstrates how dramatically that market has deepened. More transactions can improve price discovery and provide investors with additional comparable sales.

Population migration also helped create the conditions for greater investment. Marcus & Millichap identifies 2013 as an inflection point when large counties began losing domestic migrants. The pandemic accelerated movement toward smaller cities, although Chang said migration has moderated from its 2021 pace.

The combination of yield, demographics, and liquidity makes the trend broader than a pandemic-era relocation story.

What’s Next

Tertiary markets still carry risks that higher transaction volumes cannot eliminate. Smaller economies can depend more heavily on individual employers and industries, while buyer pools remain shallower than major gateway markets.

However, their growing share of CRE deal counts suggests investors have become more comfortable underwriting those risks. Tertiary markets have remained above or near half of transaction activity since reaching a 50.2% share in 2023.

The remaining yield premium could keep smaller metros competitive, particularly when investors prioritize current income and accessible acquisition pricing.

The next question is whether tertiary markets can maintain their transaction share as capital markets normalize. If liquidity continues improving, their role may become increasingly permanent. Smaller metros are no longer simply an alternative CRE allocation. They now represent a central part of the US transaction market.