(Bloomberg News) Minneapolis, Dallas and Denver are enticing U.S. commercial-property investors as a rebound in demand spreads from prime markets along the U.S. coasts.

The cities had three of the four biggest gains in sales by dollar volume among major metropolitan areas outside the coasts in the first quarter, according to CoStar Group Inc. (CSGP), a Washington-based property-research firm. Sales rose 127 percent from a year earlier in Minneapolis, 108 percent in Dallas and 89 percent in Denver. Nationally, the increase was 47 percent.

Investors are turning to secondary markets as credit availability improves and surging demand for properties in New York, Washington and San Francisco boosts prices and reduces returns in those areas. Cities such as Dallas and Houston are attracting real estate buyers because of the prospects for job and population growth, according to Robert Bach, chief economist for Grubb & Ellis Co., a Santa Ana, California-based broker.

"It's a story of investors gradually embracing risk," Bach said in a telephone interview. "They're looking at other markets to deploy cash."

Buyers have included Hines Global REIT Inc., a non-traded real estate investment trust sponsored by Houston-based developer Hines. It acquired Fifty South Sixth, a 29-story office tower in downtown Minneapolis, late last year for $180 million. Invesco Ltd. (IVZ) of Atlanta purchased a 22-story Denver tower for $213 million in February on behalf of a client. That was the highest sale price ever for an office building in the city's downtown, according to broker Newmark Knight Frank Frederick Ross.

New York, Washington

Metropolitan areas on the coasts are leading the recovery in commercial real estate as buyers are attracted to well-leased, income-producing properties in desirable locations. Prices for offices, the biggest part of the market, climbed 33 percent in New York and 21 percent in Washington in the fourth quarter from a year earlier, according to Moody's Investors Service. That compared with a 1.7 percent gain nationally.

Rising demand pushed down capitalization rates, a measure of real estate returns, in Manhattan, Washington and San Francisco. Cap rates are net operating income divided by the sales price, so they go down as values rise.

The average cap rate for Manhattan office transactions in the 12 months through March was 5.6 percent, compared with a recent peak of 6.5 percent in June 2010, according to Real Capital Analytics Inc., a property-research firm in New York. In Washington, the rate fell to 6.1 percent in March from 7.7 percent a year earlier. The San Francisco rate dropped to 6.8 percent from 7.7 percent in March 2010.

Extra Yield

The yield available outside the coasts is higher. Office- property cap rates were 7.8 percent in Dallas, 8.2 percent in Minneapolis and 8.4 percent in Denver as of March, Real Capital data show.