we are seeing this impact transactions in the second half of 2017. This
is happening as the appetite for real estate risk is tightening, and investment
sale volumes are cooling in the latter stages of the current cycle. This is
evident across equity and debt strategies:
The pace of fundraising is slowing, down 2.5 percent this year, and real
estate dry powder in North America is plateauing at $152 billion;
Value add remains the favored strategy for raising and deploying capital, as
opportunistic funds are challenged. As a result, opportunistic funds are
sitting on +21.0 percent more dry powder than value add funds, but they have
deployed half the capital year-to-date;
Investors are shifting toward debt strategies as an alternate path to yield. Life
companies are on pace to have another historic year of lending, and debt fund
dry powder has expanded 26.9 percent to record levels this year;
Traditional lenders are tightening lending standards and limiting exposure to
construction loans, large single asset loans and higher risk assets.
we move to year-end with full-year volumes down as expected (a 10.0 percent
decline), we expect these shifting market dynamics to apply further downward
pressure on volumes in 2018.
For more detail on the above and other investment trends, download the Q3 2017 U.S. Investment Quick or see the below snapshots of investment activity by asset type.
Continued uncertainty, selectivity and the changing nature of transactions are impacting volumes in the first half of 2017.
Asian capital remains active and is increasingly driving U.S. cross-border acquisitions.
Value add strategies leading fundraising with potential to reach 2007 peak this year.
Real estate debt markets remain liquid. Alternative lenders continue to challenge traditional players, sustaining competition late in the cycle.
Resurgence in industrial portfolios leads sector as lone source for deal growth in the U.S. Explore the U.S. industrial cap rate map.
Transaction activity picks up in Q3, but 2017 is falling short of 2016’s record mark. Explore the U.S. Multifamily cap rate map.
The changing nature of transactions and elevated barriers to the coast markets are inhibiting office investment. Explore the U.S. Office cap rate map.
Retail volumes continue to drop as large investors pull back from the sector due to sustained uncertainty. View the U.S. Retail cap rate map.
Hotels volumes supported by hotel REITs and continued activity from private equity funds. View the U.S. Hotels cap rate map.
As pricing and opportunities start to plateau across sectors, varied buyer types are increasing their focus on the net lease sector. View market snapshot.
Download the H1 USIO Outlook for a more complete market analysis
Group Head, Americas Capital Markets and Investor Services
Senior Director, Americas Research