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August 2019
NKF’s Capital Markets group presents the Second 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 $127.0 billion in the second quarter, up 2.3% year-over-year. Multifamily and office product recorded the highest levels of investment volume growth among the major property types, led by demand for product in non-gateway markets, such as Austin, Denver, and Nashville.
Cap Rates Cap rates remained flat at 5.6% in the second quarter of 2019 across all major property types and have been relatively unaffected by interest rate fluctuations, bolstered by strong investor demand for real estate and favorable market fundamentals. The 10 year treasury rate ended the second quarter at 2.0%, widening the spread even as most major property types have undergone sizable cap rate compression in the current cycle.
Rent Growth National office rental growth reached 3.5% year-over-year, bolstered by a mix of strong performing primary and secondary markets such as Boston (8.6%), Portland (8.0%) and Oakland (6.1%). Industrial rental growth continues at a near record pace nationally, increasing 8.5% year-over-year.
Investment Demand The buyer pool for commercial real estate remains deep and fundraising is high, evidenced by the record amount of dry powder available for deployment ($204 billion as of 2Q19) and by near-record investment volume levels. Demand for large industrial portfolios, suburban value add multifamily, and competitive core office product is notably strong.
International Capital While Canadian groups have always been a major component of international capital in the United States, their current concentration is unprecedented – in the past 12 months they have made up over 55% of foreign investment volume, and are dominant in every major property type. Middle Eastern capital has returned after several years of lackluster investment, with groups from Israel, Bahrain, Qatar and Saudi Arabia deploying capital in 1H19.
Debt Markets LTV’s are edging upward, particularly in construction lending where debt funds offer the highest leverage. However, the attention to underwriting, market fundamentals and quality of the borrower remain far above the previous cycle. Similarly CMBS and bank lending standards remain significantly tighter than the previous cycle as they are more willing to compete on pricing than on leverage.