Commercial real estate investment trends & outlook

An increase in opportunities across primary markets and entity-level transactions drove U.S. real estate transaction volumes to increase by 14.2 percent in the first three quarters of 2018 to reach $341.2 billion — exceeding expectations and positioning the market for growth in the full year. The U.S. economy is in the second-longest growth cycle on record, and economic activity accelerated in 2018, but markets are moving toward a period of moderated growth.

The following themes are expected to shape investor behavior in the months ahead:

• Pockets of the market are seeing exceptional manifestations of liquidity with investors in pursuit of scale and market share.
• Secular factors and disrupters will continue to support pockets of outperformance, from the industrial sector to office and retail.
• The first three quarters of 2018 have seen the highest amount of entity-level transactions since 2007, driven by large-scale portfolios in the retail and industrial sectors. 
• Following three consecutive years of declines, the share of transaction volumes in primary markets has been rising again in 2018.
• The composition of cross-border buyers has shifted notably, with buyers from Canada representing a one-third higher share of overall foreign purchase volume in the first three quarters of 2018.
• As the 10-year treasury rate remains volatile and trends higher, markets are expected to witness tightening spreads which will make acquisitions more expensive. 
• Dry powder is at an all-time high and fundraising continues to favor higher-yielding strategies.