Net-lease investment volume increased by 30.2% to $20.9 billion in Q3 2019.
Year-to-date volume through Q3 2019 increased by 24% to $55.2 billion compared with the same time last year. Full-year volume is on pace to surpass last year’s record level due to aggressive investors seeking compelling risk-adjusted returns.
Investors are increasingly focused on net-lease investment opportunities in high-growth secondary and tertiary markets, with the Inland Empire and Portland showing the largest percentage gains. Among gateway markets, Los Angeles and Miami had the largest year-over-year gains.
Net-lease cap rates were stable in Q3 and are expected to remain so in Q4. Spreads over Treasuries have been gradually tightening since 2012; however, the spread has been widening for the past year and reached 461 bps in Q3 due to a drop in the 10-year Treasury rate.
The global search for yield and portfolio diversification is attracting international investors to the U.S. net-lease market. Cross-border capital for net-lease properties reached $6.8 billion year-to-date through Q3, an 18.8% increase from the same period last year. Over the past two years, the top countries for inbound capital are Canada, Germany and Singapore.