CRE | Weekly update (vol. 4)

June 5, 2018

 

Cap rate analysis: increases in treasuries need not cause cap rate increases.

 

Real Capital Analytics presented an analysis that showed that the spread or difference between average cap rates and the ten year treasury yield does not always move together. In fact, it can vary greatly.

 

Commercial real estate, unlike fixed income bonds, has the capacity to increase income overtime and the potential for real appreciation. Thus, the compensating factors can sometimes overpower differences in an underlying "risk-free" rate of return.

 

REIS reports slower growth in the industrial sector in the first quarter, acceleration expected later this year.

 

According to REIS, the national Warehouse/Distribution and the Flex/ R&D vacancy rates both moved up 10 basis points to 9.15% and 9.8% respectively. Both also saw quarterly rent growth of 0.5% and 0.4% respectively, as well.

 

With e-commerce still needing more space industrial is still poised to be the best overall performing sector in 2018.

 

 

 

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