In terms of commercial real estate investment, the Twin Cities area is strictly second-tier.

But that’s a good thing.

As national and international investors — including REITs, pension funds, private equity firms, institutional groups and high-net-worth individuals — sour on buying higher-profile properties on the respective “coasts” in the economic recovery, the twin towns are viewed as an attractive alternative.

And a profitable one.

According to a recent Compass report, published by the Bloomington real estate firm Cushman & Wakefield/NorthMarq, commercial real estate investors who come here are realizing higher yields than more expensive top-tier markets like New York or Los Angeles.

Cap rates for property in San Francisco, for example, are roughly 3.5 percent, compared with the Twin Cities’ respectable 6 percent. (That’s the ratio between the net operating income produced by an asset and the original purchase price.)

Groups with capital “first prefer the gateway cities, but when they’re priced out of those markets, and their ability to earn appropriate returns goes away, they’ll check into markets in second tier-cities, and we would fall into that category,” said Scott Pollock, executive director of Cushman & Wakefield/NorthMarq’s Capital Markets Group. “You have to be patient in this market, and capital is not always in abundance, but you can see better returns in the heartland than on the coasts.”

In the first half of this year, a number of high-profile office, multifamily and industrial properties here have been snapped up by out-of-towners, continuing a postrecession trend.

For example, the 601 Tower at Carlson Center in Minnetonka was bought in June by the Winnipeg-based Artis Real Estate Investment Trust for $75 million (or $260 per square foot). The Class-A office building seemed to meet nonlocal investors’ common criteria — it’s a primo location at the suburban sweet spot of Interstates 394 and 494, and it’s nearly 99 percent occupied.

There have been multiple suitors bidding for apartment properties, according to the report. About $220 million in apartment sales closed in the first half of the year, with investors particularly infatuated with upscale urban Class A properties. However, cap rates have been “surprisingly low” for some of these properties due to increasing investor demand, it says.

The Vue Apartments in Loring Park sold to an entity linked to Kirkland, Wash.-based Weidner Apartment Homes in May for $30.8 million, a record-high of $258,823 per unit.

Another eye-popping office deal involved the sale of the TractorWorks Building and parking ramp, which attracted $54.8 million from New York-based Goldman Sachs, one of the country’s largest and most-reputable institutional investors. This transaction was interesting because the office space was just outside the Minneapolis central business district and in the up-and-coming North Loop, and came just six years after the building was sold for $26.8 million. Plus, the structure was built in 1910 and isn’t exactly a glassy office tower.

“In this market, we have not seen a lot of institutional capital chasing buildings that were built in the last century, but they have in San Francisco, Boston, Chicago and New York,” Pollock said. The concept “is a little bit untested here, but the transaction was large enough. Now the big names have arrived, more will probably come,” he said.

One area that has been constrained is the industrial sector.

While there’s strong demand for these buildings in the Twin Cities, the Compass report notes supply is low. Still, deals are being struck — Connecticut-based Greenfield Partners recently paid $67.5 million for a portfolio of eight Twin Cities office/flex industrial properties.

Pollock predicts the Twin Cities market will remain attractive to out-of-town investors in the months to come, but expects some downward pressure on cap rates as investment activity increases. And, if interest rates remain unchanged, he said yields should trend lower.

Two big deals to watch out for include the possible sale of Nic on Fifth, the upscale Opus apartment tower in downtown Minneapolis, and the expected close of 50 South Tenth Street to a German limited liability capital investment company for $164.5 million. Target Corp. is the main tenant in that building.