Industrial Cap Rates Will Continue to Compress, Brokerage Firms Predict

The average cap rate for industrial assets has dipped to a record low of 7.0 percent.

Demand for industrial space continues to outpace supply, resulting in higher rent growth and compression in cap rates.

Industrial real estate is so hot, investors “just can’t get enough,” says John Chang, senior vice president of research services with brokerage firm Marcus & Millichap. 

With investors acquiring $30.5 billion in industrial assets in the first half of 2018, JLL’s H1 2018 U.S. Investment Outlook report notes that the industrial sector is on pace for a new record year in terms of transaction volume and is expected to surpass the previous high point of $67.8 billion in 2015. That momentum, coupled with $20 billion in large scale transactions that are under contract and set to close in the second half of 2018, serves as evidence of the intensity of investor competition for industrial assets....