Commercial real estate investment volume in Orange County fell 20.7% year over year to $2.1 billion in Q3 2018. Total year-to-date investment was $5.7 billion, a noticeable increase of 16.4% from the first three quarters of 2017.
Excluding entity-level transactions, which is a better way to gauge the velocity of transactions, year-to-date investment volume was down similarly by only 14.3% from last year to $5.0 billion and Q3 2018 volume was down by 12.9% year-over-year to $1.7 billion.
The largest category of investors year to date was private buyers mostly looking for value-add opportunities. This category includes non-traded REITs, family office and private companies investing primarily their own capital. Purchases made by private buyers represented 63% of the investment total.
In Q3 2018, cap rates were a mixed bag but stayed largely stable. Industrial cap rates tightened by 30 bps from Q3 2017. Cap rates were unchanged for office and multifamily assets, remaining near historic lows. Retail cap rates ticked up modestly, by 60 basis points (bps) year over year.
For the year ending Q3 2018, the NCREIF Property Index (NPI) produced a return of 8.5% (value appreciation of +3.8%, income +4.5%), up from a low of 8.0% one year ago. The rate of return was slightly higher than the national rate of 7.2%.