Market Tracker 2019 Volume One

A Conversation with Joseph Yiu, Managing Principal, ElmTree Funds

Overall market

Let’s briefly review the U.S. net lease market. What were the two key trends in 2018?

First, demand for U.S. net lease real estate continued to increase after coming in at $57.8 billion in 2017, the second highest volume recorded. we saw increasing investor appetite in both the net lease office and industrial spaces. Second, demand rose because of the global search for yield and portfolio diversification, which has driven many foreign investors to increase their holdings of U.S. net lease real estate.

Industrial was all the rage last year. How do you expect the sector to perform in 2019?

Development for industrial product has been healthy over the last few years. The growth of e-commerce retail has spurred the demand for new distribution centers, last mile, and big-box facilities. with this type of product, we have seen more and more facilities being developed in secondary and even tertiary markets along major interstates and outside of larger metropolitan areas. However, we expect to see new construction volume to soften given headwinds such as increasing material costs, a tight labor market, and a general slowdown of economic activity.