This paper exploits a unique dataset to document novel facts on spatial differences in capital unemployment, defined as idle units searching to be traded. The data reveal that these differences are persistent and primarily driven by spatial variation in separation rates between capital and firms. We demonstrate that a dynamic spatial search-and-matching model of local capital markets can quantitatively account for these patterns. Frictions in these markets reduce aggregate output and imply that the social planner's allocation diverges from the decentralized equilibrium. Place-based policies implementing the planner allocation stimulate capital supply leading to welfare gains.