U.S. Real Estate Strategic Outlook, August 2018

U.S. real estate is performing well. The national vacancy rate is near its lowest level in 17 years and below its 20-year average in every major sector.1 Rents are rising about 3% annually and net operating incomes (NOI) nearly 5% annually, well above inflation (2%).2 Since the beginning of 2017 the Federal Reserve has hiked interest rates five times and 10-year Treasury yields have jumped 100 basis points, yet cap rates have edged lower.3 And according to the NCREIF Property Index (NPI), unlevered total returns to core property have held at about 7% (annualized), in-line with their 30-year average on an inflation-adjusted basis (5%).4

1 NCREIF. As of March 2018.
2 CBRE-EA (rents); NCREIF (NOI); Bureau of Labor Statistics (inflation). As of March 2018.
3 Federal Reserve (interest rates); NCREIF (cap rates). As of March 2018
4 NCREIF. As of March 2018.

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Last Updated: 10/18/2018