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November 2019
NKF’s Capital Markets group presents the Third 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 $151.0 billion in the third quarter, down 6.1% year-over-year. While both multifamily and office recorded a pullback in investment volume year-over-year, underlying demand for both product types remains strong, particularly in high growth markets on the West Coast, and in the Sunbelt. Industrial is on track to have a record year for investment sales volume, as the largest portfolio trade in the product type's history closed in the third quarter.
Cap Rates Average cap rates remained flat at 5.58% in the third quarter, while the yield spread with the 10-year treasury rate widened, reaching 390 basis points. The 10-year has declined every quarter in the past year, however uncertainly exists over whether the Federal Reserve will lower or keep the federal funds rate at the same level in the future.
Rent Growth National office rental growth reached 3.9% year-over-year, bolstered by a mix of strong performing primary and secondary markets such as San Francisco (8.9%), Seattle (6.8%), and Portland (6.6%). Industrial rental growth continues at a near record pace nationally, increasing 6.3% year-over-year to $7.40 PSF.
Investment Demand Institutional investors' allocation targets for real estate remain historically high and the amount of dry powder available for deployment is at record levels ($200 billion as of 3Q19). Strong liquidity, particularly in coastal gateway markets, continues to drive transaction volume as global institutions remain active across the strategy spectrum, from core to opportunistic.
International Capital International investment volume continues at a slow pace in 3Q19, with only $31.9 billion recorded year-to-date compared with $66.9 billion at the same point in 2018. However, the past three years have seen an unprecedented level of portfolio and entity-level activity (over $100 billion), particularly from Canadian, Singaporean, and Chinese groups, which has contributed to investment volume volatility.
Debt Markets Overall financing activity is poised to exceed 2018's total of $597 billion, as debt remains historically inexpensive and as liquidity and transaction volume is at a cycle high. Debt fund dry powder has reached $40 billion in the third quarter while 2019 vintage debt funds' aggregate fundraising targets are approaching $20 billion, a record level.