Commercial Investment Real Estate March/April 2019 | Page 27

T
he good times have been rolling along in the office
investment sales market. An ample supply of equity
and debt has fueled a steady level of sales activity
over the past year, and many expect that momen-
tum to continue in the first half of 2019.
“Even though we might be near the end of the cycle, or at
least having a leveling off in our cycle, globally there is a ton
of money still searching for a home,” says Rebecca Wells,
CCIM, senior vice president of investment sales at Lee &
Associates in Indianapolis. Despite signs that occupancy and
rent growth may be slowing, buyers are exhibiting a healthy
appetite to acquire office properties. Sales for 2018 (exclud-
ing entity-level transactions) dipped 3.1 percent compared to
$130.3 billion in 2017, according to Real Capital Analytics.
Transaction volume was spurred by what continues to
be a very liquid market. At the beginning of December
2018, the amount of investable capital, also known as dry
powder, held by global private equity real estate funds
reached a record high of $295 billion, according to Preqin,
a London-based research firm specializing in supplying data
and analysis to the alternative assets industry. Most of that
capital remains firmly targeted at the U.S., where global
investors see a haven for real estate investment. Institu-
tions are maintaining, if not increasing, allocations to real
estate, and many expect the creation of opportunity zones
to fuel more sales activity. “We have not seen any pullback,
and even smaller investors want to place money somewhere
and lock in historically low interest rates while they can,”
Wells says.
The big question is where that capital will be flowing in a
maturing market cycle where opportunities for rapid appre-
ciation are disappearing and occupancy and rent growth
are slowing. Investors also are cognizant of transforma-
tional changes ahead that are likely to impact future office
investment, such as new technologies and growing demand
for coworking space, Wells says. “We are seeing investors
that are being very careful with their exit strategy, upside
potential, and anything that could transform the market for
them in the coming year,” she says.
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