Average Cap Rates Improve as Industrial Market Ends 2020 with Record Fundamentals

National Industrial Cap Rate Report

During the fourth quarter 2020, the average cap rate for all industrial transactions compressed further by 25 basis points as compared to the third quarter 2020, to end the quarter at an average of 6.32%.  Year-over-year, the average has also improved and was 45 basis points lower than in 2019.  Among the six regions CBRE identifies, five of the regions experienced cap rate compression during the fourth quarter period.  The Midwest posted the biggest decrease of 73 basis points.  This significant decrease in the Midwest should be tempered given the high volatility observed throughout 2020.  Although Pacific West was the only region to report a cap rate increase, it continues to achieve the lowest cap rates for industrial properties with an average cap rate of 5.29% across all asset classes.  The outlook for industrial real estate remains strong, especially with investor migration from the other sectors.

   

Source: Valuation VIEW
Data points are confirmed closed transactions adjusted for assumed financing and reflect overall market trends.

U.S. Industrial Cap Rate Trends