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May 2019
NKF Capital Markets presents the First Quarter 2019 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.

Sales Volume National investment sales volume across all property types totaled $106.4 billion in the first quarter, decreasing by 11.5% year-over-year. Accounting for part of this decrease was the lack of entity-level deal activity, which added over $70 billion to the 2018 volume. However, fundamentals remain strong particularly in multifamily and industrial and select gateway markets such as San Francisco and Seattle continue to achieve sales volume growth.
Cap Rates Cap rates remained flat in the first quarter of 2019 across most major property types and have been remarkably resilient to interest rate volatility, bolstered by strong investor demand for real estate and favorable late-cycle market fundamentals.
Rent Growth Office rental growth across the US has continued into 2019, recording a 3.2% year-over-year increase, aided by strong performing primary markets such as Denver (9.8%) Boston (8.9%) and Seattle (7.7%). Industrial rental growth continues at a near record pace, with nine markets experiencing double digit year-over-year growth, including larger markets such as Phoenix and Sacramento.
Investment Demand Record levels of fundraising and plentiful debt capital have provided investors with substantial war chests. However, increased competition in gateway markets has led to considerable cap rate compression for traditional core assets – this has led institutional investors to adapt by pursuing more value-add and opportunistic strategies, and by chasing yield in smaller secondary and even tertiary markets, or by acquiring specialty property types.
International Capital In the past 5 years international capital has pivoted away from core office properties toward higher yielding multifamily, industrial and hotel properties, often via portfolio or entity level acquisitions – whose volume reached a record level in 2018, accounting for nearly $60 billion, or 64.1% of the total international sales. International firms have also been major debt players in the past 12 months, with the top 10 firms originating nearly $20 billion nationally.
Debt Markets The number of debt funds and the supply of debt capital remains plentiful in 2019; while LTV’s are edging upward as competition rises among banks, CMBS and debt funds, lending standards remain significantly tighter than the previous cycle as lenders are more willing to compete on pricing than leverage.