As participants noted, recent positive job reports have precipitated a slight bump in the 10-year Treasury note, but it doesn't seem likely that when the Fed releases the brakes on interest rates they will move substantially. There are just too many global forces holding them down. It's clear that the Fed would like at some point to see rates more closely approximate historic norms, but, barring some unforeseen event, many investors see this as unlikely to happen in the near future. Our view at Capital One is that any slight uptick in rates will certainly affect how investors evaluate their financing options and property valuations but it is unlikely to have any effect on acquisition activity as a whole. We have seen, however, that the prospect of a rate hike has caused many investors to accelerate the timing on refinancings, and we expect this trend to continue.

Given this situation, RealShare panelists largely agreed that cap rates have generally hit bottom, although in some West Coast markets they could drop another 25 bps. Many of the same factors that are checking the rise of interest rates will exert the same dampening force on cap rates, keeping them from rebounding. We see them stabilizing, rather than increasing substantially.

To a certain extent, lower cap rates are shaping market activity, favoring larger firms like Blackstone or Starwood that can use their size to achieve economies of scale. Accordingly, an unusually large number of mega-transactions have been completed in the past 18 months.