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2Q 2018UNITED STATES CAPITAL MARKETS REPORT

July 2018
NKF Capital Markets presents the Second 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 Across all property types, national investment sales volume edged up 1.7% year-over-year. There was a $5 billion increase in multihousing transactions completed, which included an increased amount of capital focused on value-add investments.
Cap Rates Cap rates were largely flat in the second quarter of 2018 with the exception of primary market industrial cap rates, which managed to compress by over 60 basis points year-over-year. Demand for warehouse and logistics space, bolstered by the rise in e-commerce, continues to drive compression.
Rent Growth Demand for office space in secondary markets in the West and Southeast, such as Portland, Nashville, Charlotte has driven rental and PSF growth – lower costs of living combined with an educated talent pool have made these cities attractive to technology and financial services firms.
Supply and Demand The buildup in uninvested capital, or dry powder, has underlined the record amount of demand for alternative investments The lack of core stabilized product in gateway markets has compelled funds to seek out value-add opportunities and specialty assets.
International Capital Even after a slowdown in Chinese investment volume, international investment in the first half of 2018 was up 22.1%, compared with 1H17 as groups from Canada and Europe remain eager participants in both gateway and secondary markets. Several large scale entity-level deals and national portfolios have also contributed to the substantial increase.
Debt Markets Robust multihousing investment sales volume will continue to positively drive GSE lending, which now represents 15% of all debt outstanding. Debt service coverage ratios and leverage ratios remain flat from last year, as lending standards continue to be tight, relative to the last cycle.