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OUR COMPANY AFFILIATES

CBRE GROUP

CBRE Group, Inc. is the world’s largest commercial real estate services and investment firm, with 2018 revenues of $21.3 billion and more than 90,000 employees (excluding affiliate offices). CBRE has been included in the Fortune 500 since 2008, ranking #146 in 2019. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.

INVESTMENT SERVICES

CBRE Global Investors, combined with CBRE Clarion Securities and CBRE Caledon, is one of the world’s leading real asset investment managers with $107 billion in assets under management.

Built up over more than 40 years, our unparalleled platform is focused on real assets, giving our institutional clients access to real estate and infrastructure in the Americas, Europe and Asia Pacific. Our clients benefit from a complete range of investment solutions including equity and debt, direct and indirect, and listed and unlisted strategies.

Trammell Crow Company, founded in Dallas, Texas in 1948, is one of the nation’s oldest and most prolific developers of, and investors in, commercial real estate.The CBRE Global Investors and Trammell Crow Company platforms make up the Real Estate Investments division of CBRE Group.

The Real Estate Investments division is led by
Danny Queenan, Global CEO, Real Estate Investments.

BLOGS

Regularly released content on the state of the real estate and infrastructure industry are produced by our subject matter experts and shared on their blogs. A selection of them can be found below.

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CAPITAL WATCH

Supported by record levels of dry powder combined with a low interest rate environment, a trend further supported by the Fed’s reversal on monetary policy, capital markets remain supportive of commercial real estate investment. Liquidity remains readily available across the capital stack, particularly for multifamily and industrial assets. Heightened competition to place debt has maintained tight loan spreads, in spite of recent volatility. Despite a tepid start to the year, transaction volumes through midyear were buoyant. Strong sales activity maintained downward pressure on cap rates across most sectors, while cap rate spreads widened, as treasury yields declined amid growing pessimism regarding the health of the global economy. Declining interest rates have spurred originations in recent months, while underwriting standards tightened, as lenders responded to mounting economic headwinds.

TRANSACTION VOLUMES

Current Status: Sales activity rose though the second quarter of 2019, counterbalancing the dip in sales volume through the first three months of the year. Transaction volume through the first half of 2019 closely matched the volume over the same six-month period in 2018, according to Real Capital Analytics. Sales remained buoyant despite a healthy decline in entity-level sales and cross border investment relative to recent periods.

Outlook: Healthy property fundamentals across most property sectors combined with ample liquidity should fuel sales activity going forward.

Q2 2019

$138bn

10%

U.S. Transaction Volumes
(Q2 2018 – Q2 2019)

289

9%

Loan Originations Index
(Q2 2019)

1.75%

94bps

10-Year U.S. Treasury
(9/11/19)

2.04%

46bps

30-Day Libor
(9/6/19)

YoY from Q2 2018

U.S. COMMERCIAL REAL ESTATE TRANSACTION VOLUME

PRINCIPAL CONTRIBUTOR:
Jeremiah Lee
CAP RATES

Current Status: Despite recent volatility, transaction cap rates remained stable through midyear, holding at cyclical lows across most property sectors, according to Real Capital Analytics. A reflection of the heightened demand for logistics properties and the continued evolution of retail supply chains in response to the growth in online retailing, industrial cap rates continue to trend downward, further widening the gap with retail yields.

Outlook: Commercial real estate remains fairly priced relative to fixed income alternatives, while healthy market fundamentals should sustain positive rent growth. The sustained demand for commercial real estate assets, supported by declining debt costs, should maintain downward pressure on cap rates through the near term.

CAPITALIZATON RATES

Source: Real Capital Analytics

CAP RATE SPREAD TO 10-YEAR TREASURY

Current Status: With cap rates relatively unchanged in recent quarters, growing uncertainty regarding the health of the global economy and the resulting rush to government bonds led to a 70 bps decline in the 10-year Treasury yield through the first half of 2019, widening cap rate spreads during this time.

Outlook: Expectations for slower economic growth globally and further volatility will maintain downward pressure on the risk-free rate. This, combined with still-stable U.S. property market conditions, should maintain spreads and commercial real estate’s relative value.

REAL ESTATE SPREADS
Sources: Real Capital Analytics, Green Street Advisors, Federal Reserve
LOAN VOLUME AND LENDER COMPOSITION

Current Status: With interest rates on a downward trajectory, mortgage originations rose sharply in the second quarter, led by increased bank and Agency lending, according to the Mortgage Bankers Association Quarterly Originations Survey. With the exception of retail and hotels, originations increased across all property sectors from the same time last year.

Outlook: Sustained transaction activity through the near term should keep both traditional lenders and private debt funds active, particularly as investors continue to move up the risk curve as the current growth cycle matures.

LOAN VOLUMES
Source: Mortgage Bankers Association
LENDER UNDERWRITING STANDARDS

Current Status: Lending standards for commercial real estate loans among banks tightened through 2Q19. However, loan demand increased, partially in response to lower interest rates, following five consecutive quarters of flat/negative demand, according to the Fed’s July 2019 Senior Loan Officer Opinion Survey.

Outlook: Rising volatility and indications that the current economic growth cycle may be running out of steam should lead to more conservative underwriting among traditional lenders in coming periods.

SENIOR LOAN OFFICER OPINION SURVEY
Source: Federal Reserve Board
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This information is for our clients and investors only. Please note that the content of this report is for informational purposes only and should not be viewed as investment advice or an offer or solicitation. Any opinions are solely those of the Strategy and Research Team of CBRE Global Investors and are subject to change without notice, and may not be consistent with market trends or future events. This research is based on current public information that we consider reliable, but we do not represent it as accurate, updated or complete, and it should not be relied on as such.

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