GlobeSt.com: Office typically is a strong performer in this market. Tell me more about the trends behind the decline in activity in 2017.

Campion and Reeder: Office sales had recorded positive year-over-year sales growth over the last four years but in 2017 they declined by 15%. Sales had surged in 2015 and 2016 each with over $2.4 billion, while 2017 came in at a lower but still respectable $2.1 billion. Notably, office sales have remained well above the long-term 10-year average of $1.5 billion the last four consecutive years. Furthermore, looking at the combined sales over the last three, five or even 10 years, office properties have proved the most favored asset by investors recording the highest sales volume total followed by multi-family, industrial and retail. Despite the slowdown in 2017, we expect investment activity to remain as strong as the market will allow, meaning if sellers are willing to sell, there is plenty of capital looking to be deployed. While institutional capital had shied away from suburban office investments during the first few quarters of last year, in the latter half of 2017 and now early in 2018 we are already observing the return of institutional investors to this product as underlying fundamentals continue to improve in the vast majority of submarkets.

GlobeSt.com: Which asset classes performed the strongest during the year?

Campion and Reeder: The industrial sector had a standout year in 2017 in that it was the only major property sector to post growth in deal activity for the year (+30%). Industrial has reported year-over-year total sales growth ranging from 30% to 48% over the last five years with the exception of 2016 when the year-over-year sales decreased by 30%. We expect industrial to continue to perform well. As more investors seek industrial properties, prices will continue to rise and cap rates will continue to compress. The lack of land for new development in core industrial markets and the rising of constructions costs will continue to drive values. San Diego is still looked at as a value opportunity with excellent market fundamentals as yields continue to compress in neighboring counties, a trend that is expected to continue.
The multifamily sector accounted for the highest sales volume among all property types at $2.2 billion or 36% of the total 2017 sales closely followed by office sales totaling $2.1 billion (35%).The current sales total of multifamily properties is only $125 million shy of its record-level achieved in 2007. Multi-family remains the darling of investors as the current and forecasted fundamentals such as steady increase in rents due to population growth accompanied by a preference to rent instead of own support an on-going positive returns on investment.