
Capital Wall, Strong Economic Growth, Low Interest Rates Keep Cap Rates Stable
A wall of domestic and global capital, above-trend economic growth, and a continued low-interest rate environment led to broadly stable capitalization rates for U.S. commercial real estate assets in the first half of 2018, according to the latest research from global property advisor CBRE. The CBRE North America Cap Rate Survey showed cap rates remained broadly unchanged across the sectors in H1 2018, except for some retail segments.
CBRE’s Global Chief Economist Richard Barkham says, “The wall of capital targeting real estate is bigger than it has ever been, and there is some degree of difficulty in finding investments. Existing owners want to hold, and even if they are leveraged up, have the refinancing options to be able to do that. It is very competitive. Investors are keen to buy into the innovation that is taking place in real estate, particularly logistics and office markets.”
Industrial cap rates tightened the most, and multifamily rates edged down modestly. Office cap rates were generally stable, while the hotel sector also held firm. Continued cap rate stability is expected in H2 2018.
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