Dutch residential investment volumes to reach €9.3 billion in 2019

Investment volumes in Dutch residential market is expected to reach €9.3 billion in 2019, setting a new high watermark for the market, after 2018’s €8.5 billion annual haul, according to data from Capital Value.

Prices increased by approximately 7.5% in 2019, according to Capital Value, which added that interest from both domestic and international investors in Dutch residential rental properties remains strong.

International investors continue to play an important role in the calculation of the total transaction volume. This can be attributed to the purchase of Heimstaden in the Round Hill portfolio for €1.38 billion, which is the largest residential investment transaction in the Dutch market ever. This transaction increased the transaction volume by international investors to €4.2 billion, as was forecasted in Capital Value’s prognoses earlier this year. This amounts to 46% of the total volume, whereas in 2018, this amounted to just 36%.

Though the more than 9,500 homes at Round Hill went to Heimstaden, and in doing so, remained in the hands of an international investor, the number of international investors also grew in Dutch residential rental properties. In 2018, 30% of residential rental properties that were put up for sale by Dutch parties were bought by international investors. In 2019, this percentage is 36%.

The increased interest from abroad is also indicated by the number of active international investors in the Dutch residential investment market. This number increased from 35 in 2018 to 41 in 2019. An important reason for this increase is that many foreign pension funds want to invest in Dutch residential rental properties due to the economic stability and the positive forecasts with regard to population growth and the growth in the number of households.

A total of more than 47,000 residential rental homes were sold in 2019. Approximately 33% of those were newly built which totals to 16,000 residential rental homes. Last year, this percentage was 43% when approximately 20,000 new residential rental homes were sold. Dutch pension funds remain the most important investors in new-build output.

The most important cause for the lower number of newly-built residential homes as compared to 2018 is the rise in construction costs and the fall in the number of issued building permits, as well as the slowdown in building projects due to various factors such the nitrogen oxide pollution crisis and capacity shortages in municipalities.

The number of issued building permits is expected to reach approximately 47,000 this year. This number is 37% lower than the governmental objective of 75,000 building permits per year. In order to stimulate the number of building permits, more must be done at the municipal level to accelerate procedures.

Marijn Snijders, director of Capital Value:

“A record amount of pension fund capital is available for investment in Dutch residential properties. Dutch pension funds have indicated to have approximately 4 billion euros available for investment in Dutch residential rental properties. Of this amount, 1.5 billion euros remain unused. It is a missed opportunity if we do not use this available capital. Only an increase in supply can contribute to solving the increasing shortage and rising price increases of Dutch residential rental homes.”


Cushman on 2020: private equity could be the leading source of capital for high yield assets next year

Private equity will be the leading source of capital for high yield assets in 2020 and non-CBD offices will be top of their buying list, according to a Cushman & Wakefield forecast.

Funds have been the main culprit for lower investment volumes in recent years, Cushman says, as their share of high-yield investment dropped from a 10-year average of 54% to 37% in the first half of 2019. This fall leaves private equity volumes at near parity with those of funds for the first time since 2008.

The fall in fund activity and the relative stability of private equity investment will have an influence over what assets will be popular in 2020. If these trends and preferences persist, private equity would be the leading source of capital for high yield assets in 2020 and non-CBD offices would be top of their buying list, predicts Cushman.

By H1 2019, private equity spent 58% of its capital on non-CBD offices, with retail warehouses and shopping centres a distant second and third with around a 12% share each, according to Cushman data. Meanwhile, funds have shown a greater preference for retail, which attracted a 43% share of their investment, versus 39% for offices. Industrial has suffered from a lack of high-yielding stock since investors pushed yields lower.

In the UK, there were just 40 assets offering yields of seven percent and above on the market at the end of August 2019. Over half of this stock were offices and around 20% were retail properties. This supply profile is in line with private equity investors’ preferences but could be a barrier to funds looking for suitable retail assets.

Andrew Phipps, Head of EMEA Research at Cushman & Wakefield, explains:

“Yields will remain near historical lows. Economic growth and investment returns will slow. There will be a lot of capital chasing too few opportunities, and that competition could drive investors into pushing yields lower. For investors in core real estate, this stage of the cycle is the time to reduce risk and accept lower returns. But investors with a higher risk appetite may not want to settle for low income returns. There are properties for sale with higher yields, and there is a peer group of investors willing to buy them. However, any asset with a high yield comes with risks that need to be understood.

“Investors will apply a heavy discount to the value of properties that have tenants with weak credit ratings, short leases and poor building quality. And so, a higher income return compensates for these risks. Buyers of high-risk properties, therefore, must be comfortable with the tenant’s ability to pay the rent over the holding period. The investor may use relatively cheap finance to leverage this income and boost returns, but otherwise the strategy is often basic.

“Other investors will try to improve the asset. The spread between low-risk and high-risk yields is wide and, although there isn’t a magic trick to turn the worst building into the best, actively improving a property in this environment can be profitable.”


Outflows in UK real estate funds accelerates in November to rise to £2.5 billion in last two years

Outflows from UK real estate funds accelerated in November to £251m, suffering their third worst month this year so far, according to the latest Fund Flow Index from Calastone, the global funds transaction network.

November’s £251m redemptions were up from £208m in October and £179m in September, marking a record 14th consecutive month of outflows. In the year to end November 2019, retail investors have pulled £1.9 billion from UK real estate funds and £2.5 billion since October 2018.

Last week, the £2.5bn M&G Property Portfolio, one of the UK’s biggest property funds, was suspended after “unusually high and sustained outflows” prompted by “Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector”, the investment manager announced.

Nearly £1bn has been withdrawn by investors from the fund over the last year. M&G admitted it had been unable to sell assets fast enough to meet redemption requests. The fund had been running with 17.5% cash in May but this fell to just 5% at the end of October.

Other UK’s biggest property funds for retail investors have been running down their cash levels to meet redemptions, according to Property Week. Last week, M&G suspended trading in the M&G Property Portfolio fund because its cash levels had dwindled in the face of “unusually high outflows”.

Threadneedle UK Property Fund’s cash weighting has fallen from 11.8% in June to 6.7% in September, the Janus Henderson UK Property PAIF’s cash weighting fell from 24.6% in June to 16.7% in October, and the Aberdeen UK Property Fund’s cash levels reduced from 18% to 11.5% over the same period, according to PW’s calculations.

Edward Glyn, Head of Global Markets at Calastone commented;

“Real-estate funds keep breaking new records for all the wrong reasons as capital continues to leave the open-ended sector. Two-fifths of the UK’s commercial property is in retail[1], a sector suffering relentless disruption at a time when economic weakness has depressed sentiment around parts of the commercial property asset class. Outflows are the inevitable result. Worse still, real-estate funds are now caught between a rock and a hard place. To cope with consistent outflows, they must hold very high cash balances, of as much as 30% in some cases.

“Paradoxically high cash weightings may themselves be causing further outflows as investors shun the notion of paying management fees on holdings that are not fully invested in their chosen asset class. Property is inherently relatively illiquid, so regulatory change enabling open-ended property funds more flexibility around managing outflows may help, but the timing is bad, as the furore around the collapse of Woodford Investment Management following the suspension of the firm’s main equity funds makes it more difficult to highlight that investor interests are often best served by temporary suspension of trading. In the meantime, investors are voting with their feet.”


Cushman on 2020: economics and politics will become increasingly intertwined

The pace of change could well accelerate in 2020, according to Cushman & Wakefield, with both risk and reward on offer. The global real estate adviser looks ahead to next year with three stark political and macro predictions.

Cushman’s Big 3 political and macro predictions for 2020 are:

  • Global economic slowdown is likely to continue in 2020, although the chances of a recession remain low;
  • The ongoing war for talent will be an economic hurdle to overcome in 2020 and beyond; and
  • Economics and politics will become increasingly intertwined

The global economic slowdown has been well documented in 2019, and the UN’s trade and development body, UNCTAD is one of many voices warning of a recession in 2020, says Cushman, adding that any potential recession in 2020 or beyond would likely not be to the extremes seen during the GFC.

Oxford Economics predicts global real GDP growth will ease in early-2020 but is unlikely to see any sizeable change. Indeed, consensus forecasts indicate the likely of a recession in 2020 remain low.

Andrew Phipps, Head of EMEA Research at Cushman & Wakefield, explains:

“At the start of the previous decade, global trade was growing at almost 8% per year, almost double the rate of growth in real GDP. In 2019, however, the World Trade Organization (WTO) expects trade to grow by just 2.6%, in line with GDP. Whilst the recent eruption in protectionism has undoubtedly accelerated the slowdown, other industry-related cyclical effects are also at play.

“The U.S. National Association of Business Economists believe the #1 risk to the U.S. expansion is the trade war. The IMF estimates that one-third of the deceleration in global trade activity is attributable to the auto sector—which has been largely immune in the U.S.-Sino trade dispute thus far. And up until as recently as 2015, growth in services trade had been outperforming goods trade considerably, and had to an extent been masking the overall trade slowdown.

“Clearly, a slowing growth backdrop is not the only potential threat on the horizon. The ongoing war for talent will continue to be an economic challenge for companies from all sectors, with Gartner putting talent shortage as the top emerging risk faced by businesses worldwide. In the US more cities have an unemployment rate below 4% since before 1990 (when the data began to be captured).

“Looking beyond the economy, the global political landscape has shifted in the last decade, with signs of more to come in 2020. Years of wealth inequality and stagnating wages have contributed to a rise in populism, catalysed by the increase in information transfer permitted by social media platforms. The growing chasm between the ‘haves’ and the ‘have-nots’ exacerbates the issue, with political power swinging increasingly to the extremes.

“This political polarisation has come with several consequences, most notably an increase in civil unrest and protesting taking place across the world in Hong Kong, France, Spain, Lebanon, UK, U.S. and throughout Latin America. In 2020 there will be several significant elections including the U.S. presidential election, the United Nations Security Council election, the Polish presidential election – not to mention the potential fallout from the UK general election scheduled for 12th December 2019.”


Dutch retail sector heads towards multichannel to combat e-commerce and population aging

Retailers in the Netherlands must embrace a multichannel future if they are to combat the threats from e-commerce and population aging, a new retail Report by Dutch real estate investor Bouwinvest suggests.

The unique characteristics of the Dutch retail sector have so far helped it fend off the e-commerce incursion affecting so many other global markets, but pressure is growing and with it the fortunes of large and smaller cities will increasingly diverge.

Collin Boelhouwer, Director Dutch Retail Investments at Bouwinvest, explains:

“Retail property markets are under pressure in many countries around the world due to the growth of e-commerce, demographic developments, economic uncertainties and changing consumer preferences. Retail locations in the biggest cities in the Netherlands though have performed better in the past decade, with low or only slightly rising vacancy rates, in comparison with the majority of smaller urban centres. We expect this trend to continue in the next 15 years, as the big cities look set to book the strongest population growth and be least affected by the greying of the population. As retail becomes increasingly ‘multichannel,’ the strongest and weakest retail locations across the Netherlands will become more and more polarised.”

The Netherlands ranks third in mainland Europe behind Austria and Belgium by retail space per inhabitant, with 1.59 sqm – although that is lower than the U.S., U.K. and Australia. The resilience of the Dutch retail sector has been helped by the market’s unique characteristics, including the compact nature of the country, the key role of convenience shopping centres in local neighbourhoods, and stringent urban planning regulations that have helped check the development of hypermarkets and out-of-town retail parks.

However, significant variations exist across the Netherlands. Dutch retail vacancy rates remain modest in the densely-populated Randstad conurbation in the west of the country, in particular in the big cities including Amsterdam, Utrecht and Leiden, which are seeing only a limited decline in the number of people within the 15-65 year old age bracket – comprising the vast majority of consumers in inner-city shopping areas. In contrast, provincial cities such as Alkmaar, Alphen, Apeldoorn and Venlo, with structurally older populations, are experiencing a decline in the vibrancy and diversity of retail offerings.

Jeroen Jansen, Research Manager Dutch Commercial Markets, explains:

“The Netherlands is not immune to the fallout from negative sentiment in the international retail market and, in the first half of 2019, retail investment volumes were half the level of the comparable 2018 period. Both rental and property values have been declining across the country, but since retailers want to continue renting in strong locations, we do not expect major fluctuations in rental levels there. Secondary inner-city shopping streets in the largest cities and large-scale retail centres are also well positioned, although the latter show a greater deviation in terms of total returns.”

In addition to rising e-commerce penetration – which is expected to virtually double in the Netherlands to 19% by 2025 – retailers are grappling with socio-economic developments such as declining disposable incomes among large population groups, and a shift towards services and spending on healthcare. In terms of retail segments, Dutch supermarkets have held their own in the past decade, and retail landlords are keen to have them as anchor tenants of local convenience centres and regional shopping malls. Other retail segments such as fashion, toys and consumer electronics are bearing the brunt of the growth in online sales at the expense of bricks-and-mortar stores.

Jeroen Jansen concluded:

“In the future there will be fewer stores, but the retailers will be better, and we expect a far-reaching symbiosis between online channels and physical stores. There is only one way forward: the future of the Dutch retail sector is multichannel.”


AEW: European real estate outlook positive despite worsening global economic growth and sentiment forecasts

The outlook for property has improved despite worsening global economic growth and business confidence, AEW predicts in its 2020 European Outlook.

In reaction to declining business confidence and slowing economic growth central banks cut interest rates, pushing bond yields lower for longer. In turn, these lower for longer bond yields are expected to keep property yields more stable than previously expected. AEW has found that more than 80 of the 100 markets assessed are attractive or neutral. This is a significant improvement from half of the 90 markets covered to last year.

While lower economic growth is expected to limit rental increases, the positive effect of lower for longer property yields more than offsets this negative income impact. The degree of this change varies across markets, but is generally positive. AEW’s approach of 100 market segments (which are catagorised by property type and are city specific – with each city allowed a maximum of four property types) helps it to identify the most attractive opportunities. This has translated into an improved outlook with values expected to remain stable in the medium term, with limited downside risk.

More specifically, the results show that 26 of 39 retail markets are classified as attractive or neutral, despite the prevailing negative sentiment and structural changes to consumer behaviour; London West End and City are amongst the best ranked office markets, regardless of the prolonged uncertainty of Brexit; and Dublin logistics is an unexpected beneficiary from Brexit-related supply chain re-alignment, as supply chains are re-aligned directly into the Irish capital rather than via mainland Britain.

Practically, the overall outlook is positive for core investors across the board. But, value-add strategies in UK retail with a focus on change-of-use and redevelopment can be attractive. Also, development in urban logistics should fit with core plus risk appetite in attractive markets.

Rob Wilkinson, CEO of AEW in Europe explain:

“After the recent central bank policy reversals, the lower-for-longer scenario has now become our base and, perhaps counter intuitively, this can mean good news for real estate investors. With bond and property yields expected to remain at current levels for some time to come, strong competition for deals will continue. For those with an intimate on-the-ground knowledge of specific markets, value can still very much be found, often in places that might seem out of favour, although stock selection remains crucial.”

Hans Vrensen, Head of Research & Strategy at AEW in Europe added:

“As the European property market cycle is extended, the sector can focus on adopting the latest best practice ESG processes and reporting procedures, especially on the building level. This is consistent with our positive market outlook, as the usual cyclical risks of excessive new supply of space and use of debt are now less of a concern. We could call it the calm before the storm – with no clouds on the horizon yet.”


Demand drivers across Europe’s largest healthcare markets underpinned by diverging trends

Significant cultural differences in how people plan to spend their retirements within European markets inform the relative attractiveness of the healthcare investment markets, a new survey shows.

Fifty-two percent of French people rely primarily on themselves for their long-term care arrangements, well above the proportion of Germans (26%), Italians (29%) and Spaniards (21%), according to a survey commissioned by Primonial, the French partner of AviaRent Invest AG. The same applies to Italians (35%), although 28% say they will rely on their children to assist them as they get older. In southern Europe, inter-generational solidarity appears to be more prominent than in the north.

Primonial surveyed around 4,000 European seniors in the four most populous euro zone countries: Germany, France, Spain and Italy.

Mathias Giebken, CEO and founder of AviaRent Invest AG, explains:

“The disparity in family solidarity in Europe seems to be directly related to the comparatively much higher levels of investment in northern Europe. Germany and France invested EUR 1.5 billion, three times as much as Italy and Spain in 2017. The study also concludes that Germany and France are the most attractive countries for investments in healthcare real estate because of their high purchasing power and demographic potential.”

While the markets in Germany and France have the most attractive risk-return ratios, Spain and northern Italy are more balanced markets in terms of longer-term investment opportunities and demand. At the same time, the 6% prime yields on investments in these southern European countries in 2017 were higher than the 5.0% to 5.5% yields in Germany and the 4.2% to 5.25% available in France.

Giebken added:

“By 2050 the proportion of the population over the age of 80 in Europe will more than double as the generation of baby boomers ages. Given the fact that there is already very strong demand for care facilities, we are facing an acute housing problem across the whole of Europe. In Germany alone, around 80 billion will have to be invested in new and modernised care facilities over the next 10 years. In future, investors should increasingly develop partnerships with international players who focus on urbanised and qualitative locations with high purchasing power and strong demographic potential.”

The study by BVA Opinion also concludes that there is an investment potential of several billion euros in healthcare real estate to redress the existing undersupply of nursing places. Due to the massive effects of demographic change, public health care funds will be limited by budget constraints, especially in Europe, and the private sector will play an increasingly important role.

Giebken added:

“The decisive criterion is the choice of location. Proximity to city centres or to larger metropolitan areas should be ensured in order to guarantee high market liquidity. We also invest in rural regions, but only where our intensive location analyses have registered net population growth. We are certainly seeing growing interest in larger-scale developments and our Assisted Living Plus product line, which creates senior residences with a neighbourhood character. Demand is growing for small residential parks, communities with day-care centres, shared canteens and outpatient care. We are seeing a real shift away from pure care facilities towards new forms of living.”


WeWork rescue a wake-up call for industry on systemic risk in heavy coworking concentration

WeWork’s aborted IPO and $9.5 billion rescue by Softbank has been a wake-up call for those in the industry happy to lease large proportions of their office portfolios to the coworking behemoth at inflated rents and long-term lease contracts, says UBS.

WeWork, which become the most active serviced office provider in Europe in terms of take-up, will have to adjust to a new environment with their ego heavily deflated, UBS says, along with renewed scrutiny on the business models’ mismatch between long and short-term lease liabilities.

Zachary Gauge, European real estate analyst, at UBS-AM Real Estate and Private Markets, explains:

“The liability mismatch is a risk from the operational side, and whether this type of business is sustainable remains to be seen, but the attraction to the corporate occupier is clear and it has raised the bar for what is expected from traditional landlords.

“The end result of this for the investor is ultimately higher capex and management requirements in return for shorter terms of guaranteed income, leading to lower overall returns from the asset class over the longer term. This is not necessarily an issue as many investors now accept that we are operating in a lower growth, lower return environment, but it is particularly important that sensible assumptions on future capex, vacancy and re-leasing costs are factored into the cash flows at the acquisition stage to avoid unpleasant surprises further down the line.”

Despite UBS’ concerns over the business model employed by serviced office providers, the fund manager expects the sector to remain a significant part of European occupational markets for the foreseeable future. The challenge is trying to understand where the equilibrium rate of penetration is, and acknowledge that individual markets will have different levels based on some of the factors outlined earlier, says UBS.

Zachary Gauge added:

“In reality, we will probably only find out the true equilibrium levels once the European market has entered a significant downturn on the occupational side, which would stress test the business models of the operators. It is difficult to predict exactly how this would play out, as much would depend on the severity and length of the downturn itself.

“We would expect that the providers that survive the downturn are the largest, with the strongest capitalisation, lowest levels of leverage and the lower average rental costs across their portfolio. We would also expect to see a fair amount of consolidation within the sector as it becomes more mature and providers focus towards the corporate leasing side, which requires greater scale. And this is where we see the longer-term challenges for traditional landlords really developing.

“Taking aside any weakness in the individual covenant strength of the providers, there is a clear systemic risk of having a serviced provider as a tenant. The issue is that the serviced providers’ model is ultimately driven by the same as the landlords’ office investment portfolio; ie. occupational demand. So, in a downturn scenario, while traditional occupiers’ businesses might suffer, the attributed risk would be nowhere near as intrinsic as the serviced office providers’ and the landlords’.


Why Berlin is the hottest office market in Europe

Office take-up in Berlin is breaking all previous records: a total of 319,600 sq m, the third quarter of 2019 was not only the strongest quarter of the year, but also unmatched in the history of Germany’s capital city, according to Savills data.

Total office space take-up in the first nine months of the year was 795,200 sq m, an increase of 22.6 per cent on 2018, and could surpass 1 million sq m by year end which would be another record, Savills data shows.

According to Jan-Niklas Rotberg, teamleader office agency Berlin at Savills Germany, three things stand out when trying to understand why the Berlin office market is the hottest in Europe.

Although the volume of completed office space will increase by 384,000 sq m in 2019 and by 782,400 sq m in 2020 at an above-average rate, 92 per cent and 67 per cent respectively of this space has already been pre-let. What has been particularly striking has been the large size brackets of deals, with 19 in the last 12 months being over 10,000 sq m.

The key driver behind this is that, with vacancies as low as 1.3 per cent, many companies are securing the opportunity for future growth, says Savills’ Jan-Niklas Rotberg. And while prime office rents in Berlin stood at €458.4 per sq m per annum for Q3 2019, this is still considerably lower than other European capitals such as London (West End: €1,454.4, City: €1,059.1), Paris CBD (€845), Stockholm (€727.7), Dublin (€700) or Milan (€600).

Jan-Niklas Rotberg explains:

“Berlin has always been the start-up capital of Germany, attracting 28.5 per cent of the 130 start-ups registered every month in the country in 2018, but it is increasingly attracting large corporates too. Examples this year alone include Sony Music relocating its offices from Munich to Berlin Schöneberg, with Savills advising, and Amazon announcing it will take 28 of the 35 floors of the ‘EDGE East Side Berlin’ office building which is currently being developed near the Warschauer Bridge. This will see Amazon’s employees in Berlin rise from zero in 2011 to almost 2,000 in 2019.

“Sony and Amazon are just two of the many overseas companies that are focusing on the German capital. Currently, many large tech corporates and start-ups from the US in particular are establishing a very strong presence in the city. We expect this to have a pull effect over the next few years, which will also bring other tech corporates and related companies to Berlin. As a result of these developments, there’s currently no end in sight for the booming Berlin office market.”


US real estate risk premium increases as uncertainty weighs on sentiment

Falling interest rates eased upward pressure on cap rates in US real estate, but the risk premium has increased, says UBS in its latest real estate outlook, reflecting a broad-based uptick in uncertainty.

Fundamental strength in the US economy acts as a stabilising factor by supporting income growth at the property level. A tight labour market and optimistic confidence measures reinforce UBS’ expectations for relatively good occupancy rates and continued rent growth in the US real estate sector.

In its quarterly global outlook, UBS wrote:

“Beginning in early 2016, US real estate entered a widely-anticipated period of income-driven performance. On the whole, US properties are appreciating at about the pace of inflation. Appreciation relates back to the positive rent growth generated by properties, as opposed to the out-sized influence of capital flows the US experienced in 2014 and 2015.

“Income-generated performance is consistent with a long-term expectation for private commercial real estate investments. Looking more closely at the drivers of income, rent growth is the true powerhouse behind the gains. Property-level income growth should outpace today’s modest inflation even as the pace of growth moderated in recent years.

“Even though 2018’s rising interest rate environment reversed and long-term interest rates fell during 2019, uncertainty remains and the increased risk premium appears warranted. Capital investment into stabilised assets is increasing, an expected outcome in a long expansion. Debt and equity capital is seeking growth strategies, and existing assets are under pressure to compete with new construction. Investors should pay careful attention to the risk-return expectations for incremental capital.”

Investment activity US commercial real estate sales volume was $499 billion in the 12 months to Q3, up slightly compared to the prior 12-month period. During the three quarters of 2019, the volume of hotel, office, and retail properties sales remained consistent with the previous two years. However, apartment sales volume has maintained a rising trend and industrial sales volume increased over the prior year.

Enduring low interest rates are supporting the low cap rate environment and cheap real estate debt. However, liquidity is not as abundant as the period prior to the lead-in to the last downturn.

UBS added:

“The spread between property yields and the cost of debt decompressed somewhat in 2019. However, banks must contend with a flat yield curve. When both short and long-term rates are nearly the same, it becomes difficult to pay depositors a market rate while charging a competitive interest rate on loans. On the whole, US debt markets can be described as operational but not excessive, which encourages development but not an abundance of supply.

“With little movement in cap rates, the downward move in Treasury rates widened the spread available on stabilised US real estate. While the real estate spread is no longer compressing, the higher risk premium seems warranted as uncertainty around future economic growth also increased. That said, there is no obvious distress in the market that might place stronger upward pressure on cap rates.”