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4Q18 UNITED STATES CAPITAL MARKETS REPORT

February 2019
NKF Capital Markets presents the Fourth Quarter 2018 United States Capital Markets Report. The statistics and in-depth market perspective contained in the report illustrate current trends with a focus on national investment sales.

Executive Overview

Sales Volume National investment sales volume across all property types totaled $160.0 billion in the fourth quarter, the highest quarterly total since 4Q15, and increased by 14.9% year-over-year. Several multi-billion dollar entity-level transactions in tandem with record levels of multifamily and industrial investment accounted for the surge.
Cap Rates Cap rates remained flat in the fourth quarter of 2018 and have been remarkably resilient to interest rate volatility, bolstered by strong investor demand for real estate and favorable market fundamentals
Rent Growth While office rental growth has been strong in supply-constrained primary markets such as New York City, San Francisco and Seattle, various secondary markets with high levels of employment growth and Class A construction have seen a healthy expansion of rental rates.
Supply and Demand The combination of record levels of investment, plentiful debt capital and increasing levels of dry powder, underline the robust demand for all property types. Investors continue to chase yield, often in smaller non-gateway markets, and are increasingly seeking out assets with promising risk adjusted returns
International Capital Direct acquisitions by international groups increased by 64.4% year-over-year, with groups from Canada, Singapore, and China accounting for the largest share of the volume and targeting significant portfolio and entity-level transactions.
Debt Markets The number of debt funds and the supply of debt capital remained plentiful in 2018; while LTV’s are edging upward as competition rises, lending standards remain significantly tighter than the previous cycle as lenders are more willing to compete on pricing than leverage.