Leading the way was the apartment sector with over $19 billion in transactions, or 30.6% of the total volume, according to NREI. The figure is 57% higher than the second quarter. Likely reasons include the improving economy, increasing interest rates (which have an adverse impact on new home ownership) and the condominium conversion trend, which is decreasing the rental supply in many markets.

The apartment frenzy has boosted class A apartment values by 12% over the last four quarters to $132.10 per sf, and the improvement is not isolated. Value appreciation has occurred in 58 of the 61 apartment markets tracked by NREI over the past 12 months. As a result, capitalization rates for apartment investments have declined more than any other sector over the past four quarters, with class A apartments sinking to 6.2% nationally, a drop of 120 basis points, according to NREI.

Retail properties, usually first in price appreciation, came in third this year, posting a national appreciation of 11.9% over the past four quarters to $162.11 per sf. CBD office came in first, with a 12-month increase of 12.7% to $257.17 per sf. Warehouse properties showed an increase of 9.6% over the past 12 months to $54.27 per sf. Suburban office, which saw values increase a paltry 1% during 2004, is up 7.1% over the past four quarters to $198.12.