Industrial (+3.1%) was the best-performing sector for the fifth consecutive quarter with Hotel (+1.8%), Office (+1.6%), Retail (+1.5%), and Apartments (+1.5%) also gaining. The West region was the strongest performer for the third quarter in a row, returning 2.2%, and the Midwest lagged with a 1.3% return. Transaction volume increased to $7.7 billion, up 11% from the first quarter but down 14.5% from the second quarter of 2016. Appraisal capitalization rates increased to 4.5%, slightly up from last quarter. Transaction capitalization rates fell to 6.1% from last quarter’s 12-quarter high of 6.3%. The spread between appraisal and transaction rates decreased to 1.6 percentage points.

Occupancy rates fell for the second consecutive quarter to 92.8%. Apartment and Retail occupancy rates increased slightly while Industrial and Office rates decreased.

The NCREIF Open End Diversified Core Equity Index rose 1.7% (1.1% from income and 0.6% from appreciation), a decline from the first quarter and the lowest since 2010. Income returns increased slightly and appreciation fell to a new seven-year low.

Global real estate investment trusts (REITs), tracked by the FTSE EPRA/NAREIT Developed REIT Index (USD), posted a 3.1% return, outpacing U.S. REITs, which gained 1.5% as measured by the FTSE NAREIT Equity REITs Index. The Callan Global Real Estate Style Group gained 3.5%, while the U.S. REIT Style Group increased 2.0%.

In the U.S., REITs rebounded in June after being relatively flat in April and negative in May. Retail (-7.6%) was again the worst performer, depressed by weak earnings results from large retailers and the growing market share of e-commerce. Self-Storage (-2.7%), Specialty (-0.6%), and Timber (-0.1%) also fell. Health Care (+5.3%) remained strong as efforts to overturn the Affordable Care Act faltered. Industrial (+12.0%), Data Centers (+9.2%), Infrastructure (+8.8%), and Residential (+6.0%) all experienced strong gains.

Europe, as represented by the FTSE EPRA/NAREIT Europe Index, was the strongest performing region, returning 10.6% in U.S. dollar terms. The euro’s appreciation against the dollar was a major driver of returns, as was strong, diversified growth across the majority of the region’s economies. The successful takeover of several Spanish and Italian banks boosted continental European stocks and helped them outperform their U.K. peers.

The Asia-Pacific region as measured by the FTSE EPRA/NAREIT Developed Asia Index returned 1.6%, outperforming the U.S. but lagging Europe. Singapore and Hong Kong again provided the strongest regional performance while Australia lagged behind, hurt by a weak retail sector. Japanese REITs suffered negative returns this quarter, but strong results from Japanese developers were enough to push the aggregate real estate index to a positive return.

Commercial mortgage-backed securities (CMBS) issuance for the quarter increased to $20.2 billion, a 45% increase over $13.9 billion in the first quarter. This also represented a 79% increase over the second quarter of 2016 ($11.3 billion).