All five of the major property sectors significantly outperformed their 10-year total dollar volume averages during Q4, says Ten-X. The multifamily sector accounted for 34.7% of the quarter's transaction volume, while office and industrial contributed shares roughly in line with historical norms, growing by 15.6% percent and 15.1%, respectively, during the quarter. Only retail and hotel saw deal volume and their share of deal volume decline.

Looking at pricing growth, Ten-X says values are up 9.1% year-over-year as of December, per the Moody's/RCA Commercial Property Price Index. The firm's Ten-X All Property Nowcast, which gauges national pricing through a combination of proprietary and third-party data, shows that following a strong start to last year, growth has since slowed significantly, including three straight months of flat or minimal growth dating back to December. Despite the recent slump, year-over-year pricing is now up 8.1%, while the All Property Nowcast remains at an all-time high.

Cap rates rose in four of the major sectors during Q4, as 10-year US Treasury yields jumped nearly 90 basis points from the prior quarter. That being said, Ten-X notes that cap rates remain well below 10-year average rates in each sector, except for hotel.

The Capital Trends report shines a light on the risk premium, a component of cap rates that factors out the risk-free 10-year Treasury yield and focuses solely on the yield corresponding to the risk of investing in a certain CRE sector. Ten-X's calculations of CRE risk premiums show that, between Q3 and Q4, they fell across all five CRE sectors by significant margins, bringing all except hotel well below their historic averages. “The risk premium can serve as a buffer against the impact of rising interest rates on cap rates,” according to the report.

IRVINE, CA—The past year ended on an upbeat, as commercial real estate transaction activity posted its second consecutive quarterly increase, Ten-X says in its latest Commercial Real Estate Capital Trends report. However, the firm cautions against expecting the upward trajectory to continue indefinitely.

“For years, a slowly expanding economy has been a boon to commercial real estate, driving unprecedented periods of growth in many areas of the market,” says Peter Muoio, chief economist with Ten-X. “After years of smooth sailing, however, the industry could be headed for stormier waters.”

Among other undercurrents, Muoio says the Federal Reserve's stated plans for multiple increases in the federal funds rate this year and the possibility of “wholesale changes” to trade, immigration and tax policies all are contributing to “a level of uncertainty the market has not witnessed for years. While commercial real estate remains in a period of steady growth at the moment, investors should be aware that this enduring stretch of stability may be nearing its end.”

Citing data from Real Capital Analytics, Ten-X says investment activity in the fourth quarter of 2016 reached $129.7 billion, up 7.3% from Q3 and continuing a rebound from a slowdown in the first half of last year. The firm notes that “healthy investor confidence levels” have kept transaction volume above $100 billion in every quarter since 2014; however, Q4's total was down 19.6% from the year-ago period, when a flood of year-end deals drove the sector to its current cyclical peak.

All five of the major property sectors significantly outperformed their 10-year total dollar volume averages during Q4, says Ten-X. The multifamily sector accounted for 34.7% of the quarter's transaction volume, while office and industrial contributed shares roughly in line with historical norms, growing by 15.6% percent and 15.1%, respectively, during the quarter. Only retail and hotel saw deal volume and their share of deal volume decline.

Looking at pricing growth, Ten-X says values are up 9.1% year-over-year as of December, per the Moody's/RCA Commercial Property Price Index. The firm's Ten-X All Property Nowcast, which gauges national pricing through a combination of proprietary and third-party data, shows that following a strong start to last year, growth has since slowed significantly, including three straight months of flat or minimal growth dating back to December. Despite the recent slump, year-over-year pricing is now up 8.1%, while the All Property Nowcast remains at an all-time high.

Cap rates rose in four of the major sectors during Q4, as 10-year US Treasury yields jumped nearly 90 basis points from the prior quarter. That being said, Ten-X notes that cap rates remain well below 10-year average rates in each sector, except for hotel.

The Capital Trends report shines a light on the risk premium, a component of cap rates that factors out the risk-free 10-year Treasury yield and focuses solely on the yield corresponding to the risk of investing in a certain CRE sector. Ten-X's calculations of CRE risk premiums show that, between Q3 and Q4, they fell across all five CRE sectors by significant margins, bringing all except hotel well below their historic averages. “The risk premium can serve as a buffer against the impact of rising interest rates on cap rates,” according to the report.