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January 2020
NKF’s Capital Markets group presents the Fourth 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 $570.6 billion in 2019, down 1.6% year-over-year. The decline in activity was due to lower retail and hotel volume, however multifamily hit a new all-time record in 2019 at $183.5 billion, while industrial surpassed the $100 billion dollar mark for the first time in history. Various markets in the West and Southeast have contributed to investment sales momentum, and have displayed high levels of employment and population growth.
Cap Rates Average cap rates remained flat at 5.55% at year end, while the yield spread with the 10-year treasury rate declined to 363 basis points. The 10-year treasury rate increased slightly in 4Q19, however the Federal Reserve has, so far, not committed to raising rates significantly in the future. Consensus Bloomberg forecasts indicate that the 10-year treasury rate will not exceed 2.5% by 2021, implying that the Fed will remain accommodative in its monetary policy.
Rent Growth National office rental growth was 1.9% year-over-year, bolstered by a mix of supply-constrained primary markets and fast-growing secondary markets. Industrial rental growth continues at a near record pace nationally, increasing 3.5% year-over-year to $7.41 PSF. Industrial markets with transportation links to the largest metropolitan areas by population had some of the highest levels of e-commerce fueled rental growth, such as Northern New Jersey (10.2%) and Inland Empire (9.1%).
Investment Demand Institutional investors' fund targets remain historically high and the amount of dry powder available for deployment is at record levels ($196 billion as of 4Q19). Behind this rise has been the increasing allocation to real estate by LPs, from pension funds and sovereign wealth to asset managers and insurance groups. Additionally 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 sales volume declined substantially in 2019, to just $48.8 billion in the absence of major entity-level transactions, which have characterized international investment in the later part of this cycle. However, single asset volume, which is a more reliable measure of international sentiment, rose markedly by 5.0% to $35.7 billion. Canadian groups continue to lead international investment, with over $14 billion invested in 2019 however various groups from the Middle East and Asia have either entered or returned to the US market.
Debt Markets Overall financing activity hit an all-time high in 2019 at $703 billion, surpassing the investment sales market by over $130 billion. With low benchmark interest rates, and increased competition among lenders, debt remains historically inexpensive at a point in time where liquidity and transaction volume is at a near cycle high.