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Research - AUGUST 29, 2019

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Investors shift to core properties in Washington, D.C.

by Andrea Zander

Aggressive bidding and pricing in Washington, D.C., metro’s value-add space is driving significant cap rate compression, leading more investors to shift focus toward core properties as an alternative, reported Cushman & Wakefield.

This shift led to a 30-basis point drop in average returns year-over-year for the core sector but the space will continue to be an attractive yield alternative throughout 2019 due to sustained aggressive pricing for value-add properties throughout the region.

From January to May 2019, only 17 percent of all trades were class A properties, which constituted 26 percent of total transaction volume. Comparatively, so far in the second half of the year, approximately 29 percent of all trades were class A properties that make up 39 percent of transaction volume. With no signs of a slowdown in investors’ appetite for value-add, the core sector should continue to remain an attractive yield alternative throughout 2019.

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