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News release


Continued low-yield environment driving renewed investor creativity

Rational underwriting and selectivity drive evolving investor strategies

CHICAGO, Feb. 20, 2018 – The U.S. economy remained fundamentally sound heading into 2018, notwithstanding recent stock market volatility. Transaction volumes for 2017 reached nearly $400 billion, a 9 percent softening from 2016 driven largely by fewer large deals in gateway markets, according to JLL's H2 2017 U.S. Investment Outlook. ​

"The softening of transaction volumes has largely been expected as the redeployment of capital remains a key area of concern for investors underwriting acquisitions at current pricing," said Jonathan Geanakos, President, JLL Capital Markets, Americas. "The market is showing extraordinary discipline, which is a sign of a rational underwriting environment. This is resulting in more thematic investment and the emergence of creative, less-conventional activities and structures."

JLL's research shows industrial was the lone sector to show a year-over-year volume increase, growing 23.3 percent in 2017 to nearly $60 billion. Volumes were down across the office, retail, multifamily and hotels sectors. While a drop off in large trades was a driving factor to decreased volumes in 2017, interest in U.S. commercial from investors domestic and abroad remains strong, and the proportion of off-shore capital holds steady.

New records for industrial

As was the case in the first half of 2017, the industrial sector was the only one to post year-over-year gains. Last year was the second biggest year on record for transaction volumes, trailing only 2015, growing 25 percent over 2016. The sector saw average vacancy reach new lows below 3 percent and average rents reach news highs at $5.49 per square foot. The continued expansion of e-commerce users has been a leading factor in robust fundamentals.

While single-asset deals reigned in 2017, registering a record $33.7 billion dollars (56.9 percent of transaction activity), portfolio activity grew to $25.5 billion for the year. That portfolio activity looks to grow in 2018, with more than $5.5 billion in large-scale industrial deals already under contract for the year, and another $7 billion coming to market early in the year.

Asian capital continues its U.S. push

Global capital continued to show strong interest in the U.S., spending $44.7 billion across sectors, despite a 28.7 percent drop off in total cross-border investment year-over-year.

"Cross-border capital remained very focused on the U.S. in 2017," said Sean Coghlan, Director, Americas Research, JLL. "While there was a year-over-year dip, it's important to note foreign investment still accounted for 11.2 percent of total volume in 2017 compared to 14.4 percent the year prior. The U.S. remains a geography of primary focus for foreign real estate investors."

Asian investors continued their push into the U.S. markets as their share of foreign acquisition volume was at its second highest level on record at $16 billion of inflows, or 35.9 percent of total cross-border investment.

The placement of foreign capital is beginning to shift noticeably. For instance, $1.8 billion of foreign capital poured into the student housing sector, showing a continued theme of foreign investors becoming more comfortable with a wider array of asset classes beyond office. This trend is expected to continue in 2018, as foreign investors look for opportunities and yield outside of their typical investments.

Debt markets further boosting liquidity in debt markets

Like investors, lenders remained disciplined and selective with their capital. However, the emergence of debt funds is helping to keep financing flowing. North America-focused closed-end debt funds raised a record $18 billion in 2017, a 59.5 percent leap over 2016 and the most raised ever.

Commercial mortgage backed securities also offered a viable alternative to debt seekers, rising 25.6 percent year-over-year to $95.4 billion. Meanwhile, life companies made $65.0 billion in commitments in the 12 months through the third quarter of 2017.

Going into 2018, liquidity across traditional and newer sources of debt capital will remain high, with debt funds and CMBS providing options for those deemed higher risk by traditional lenders in the current market.  

JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm's in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2017 alone, JLL Capital Markets completed $170 billion in investment sale and debt and equity transactions globally. The firm's Capital Markets team comprises more than 2,000 specialists, operating all over the globe.

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit