FOREIGN INVESTORS INCREASE HOLDINGS

  • Q1 2019 net-lease acquisitions volume fell by 3.6% year-over-year to $12.5 billion.
  • Rising demand for U.S. net-lease real estate led to $68.3 billion in investment volume in 2018—the highest annual total since CBRE began tracking the market in 2002. Volume in 2019 is expected to remain elevated, with increasing investor demand for net-lease office and industrial assets.
  • Investors are increasingly focused on net-lease investment opportunities in high-growth secondary and tertiary markets. While gateway markets like New York City, Washington, D.C. and Chicago had the largest gains in investment volume from 2017 to 2018, markets such as Phoenix, Seattle, Baltimore, Columbus and Atlanta made the top-10 growth list.
  • Overall net-lease cap rates were stable in 2018. Spreads over Treasuries have been gradually tightening since 2012 and narrowed to 321 basis points (bps) last year with rising interest rates. Recent decreases to the 10-Year Treasury rate brought the Q1 spread to 386 bps. Cap rates and interest rates are expected to remain stable for the rest of 2019.
  • The global search for yield and portfolio diversification is driving foreign investors to the U.S. net-lease market. In 2018, foreign investors increased their holdings of net-lease properties by $8.8 billion, a 30.1% increase from the previous year. Investors from Canada, South Korea and China were the top buyers from 2016 to 2018. In Q1 2019, foreign investors accounted for an even larger share of net-lease investment (15.1%) than in 2018 (12.9%).

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