Photo of Spencer Levy Levy says many would-be sellers are “choosing to refinance rather than sell in an increasingly uncertain market.”

LOS ANGELES—The cap rate story for the first half of this year is in the details, rather than overarching trends. And that’s expected to be the case as well when transactions in the year’s second half are tallied up, going by the results of CBRE’s latest North America Cap Rate Survey.

The general outlook for cap rates and returns in the year’s second half is for stable pricing, according to the report accompanying this year’s survey. “However, the sentiment of survey respondents varied by property type, segment, class and metro-tier grouping. The consensus is that if rates do change in H2 2017, they are more likely to increase modestly.”

In general, “there was limited movement in cap rates for US commercial real estate” during the first six months of this year, with the exception of class B and C retail in secondary markets, notes Spencer Levy, senior economic advisor and head of Americas research at CBRE. “At the same time, we have seen a decline in sales transaction volume during the first half of ‘17. Instead, many would-be sellers are choosing to refinance rather than sell in an increasingly uncertain market, particularly in multifamily.”

Even amid a decline in transaction volume, though, multifamily pricing held firm in the year’s first six months, notwithstanding some concerns about supply. Meanwhile, both cap rates and returns on cost remained at historically low levels, “indicating strong investor interest and willingness to pay high prices at low rates,” according to the CBRE report.

Looking ahead, the outlook for multifamily cap rates is more of the same in this year’s second half. CBRE says 72% of survey respondents expect rates to remain at current levels for both stabilized and value-add infill acquisitions, and the same goes for 79% of survey respondents when it comes to suburban assets.

Although modest at seven basis points overall—albeit greater in some asset classes, such as class B properties—the decrease in industrial cap rates in H1 ‘17 is “a testament to the pricing strength of the sector” although the gradual historical decline of industrial cap rates actually slowed in the year’s first half, says CBRE. The lowest cap rates for industrial once again occurred in coastal markets, including Seattle, San Francisco, Orange County, Oakland, Northern New Jersey, Los Angeles and the Inland Empire.

“From a capital markets perspective, the US industrial real estate sector is having another great year,” says Jack Fraker, global head of industrial & logistics, CBRE Capital Markets. Investment sales volume is on paced to make this “one of the best years ever,” he adds. “Investors are attracted to the asset class for its reliable and predictable returns, which continue to increase due to tangible rental rate growth and very strong fundamentals overall.”

Cap rates for stabilized CBD office properties ticked up modestly for the third straight survey, rising by three bps to 6.66% in H1, according to the CBRE survey. Meanwhile, cap rates for stabilized suburban assets rose across all classes and all market tiers. “We are continuing to see a divide between suburban markets that have urban characteristics and/or and those markets with transit oriented development, and those suburban markets that lack one or both of those elements,” Levy says

Hotels showed modest cap rate expansion, primarily in the economy sector, says CBRE. Every hotel market segment in CBDs recorded single-digit upticks in cap rates ranging from four to eight bps, while suburban properties registered slightly less cap rate widening.

The picture grows more complicated for the retail sector, in view of the material distinctions between major market and secondary market properties, and the enormous distinction between open-air and grocery anchored retail versus other formats. Nonetheless, CBRE says retail is the one asset class that showed material cap rate expansion in secondary and tertiary markets, particularly in class B and C assets, during H1. Power centers bore the brunt of this expansion, rising 39 bps during the first half of this year.