1Q 2018 Investment Report
The New Year continued to break records in the industrial investment market. Industrial real estate was and is the hottest asset class in the region. Cap rates reached all-time lows for highly desirable buildings. Evidenced by low cap rates, the combination of short supply and constantly increasing demand has led investors to pay top dollar for these investments. E-commerce and other distribution-related users continue to buy and lease more space giving investors the confidence to stretch their budgets. Cap rates have remained low and steady due to several economic factors.
First, investors are chasing returns in an asset class they are confident is stable. Bond yields remain too low and stock returns, although high, possess risk as they continue their unprecedented run. This has left real estate as the asset class of choice. Low vacancy and high rental rates have given investors the reassurance to load their portfolios with more real estate. Interest rates, although rising, remain low enough to keep lending momentum moving forward.
Over the next few months we predict more of the same. However, as interest rates start to creep up, cap rates will naturally begin their slow rise. Further, as markets continue to set records, look for warning signs of investors believing it may be too good to be true. Any rattle in the stock or bond market may have ramifications to the real estate market. For now, with low cap rates, investors looking to sell should take advantage of these exceptional times.