National Retail Cap Rate Report


Despite uncertainty from COVID-19 variants, the growing U.S. economy continues to support a positive outlook for most segments of retail real estate. Total commercial real estate investment volume of $296 billion in Q4 2021 brought the full-year total to $746 billion, both record levels. Total investment volume, including retail, in 2022 was projected to increase 5%-10% over 2021 levels, roughly equal to pre-pandemic volumes from 2019, as investor demand remains strong and capital abundant.

Based on Valuation VIEW data, including all retail sale transactions for Q4 2021, the average U.S. retail capitalization rate decreased by 11 basis points (bps) quarter-over-quarter to 6.17%. The average retail cap rate has decreased 38 bps compared to Q4 2020. Among the six U.S. regions identified by CBRE, the average cap rate decreased in all except one. The Midwest, Mountain, Pacific West and Southeast all saw moderate decreases ranging from 8-19 bps, while the South Central region saw the highest decrease of 51 bps. The only region that saw an increase was the Northeast at 23 bps. The Pacific West retained the lowest average cap rate for retail properties (averaging 5.58% in Q4 2021), followed by the Mountain (5.99%), Southeast (6.01%), South Central (6.07%), Northeast (6.41%), and Midwest (6.60%) regions.

The compression in cap rates recorded in Q4 2021 continues a downward trend for the past three quarters and demonstrates increasing positive investor sentiment for the retail sector. While there were upticks in the average at the beginning of 2021 (Q1) and 2020 (Q1), the overall trajectory has been downward trending. While any given quarter may be influenced by the inventory traded, the trends shown are generally consistent with narrative throughout the market.

Both single-tenant net-leased properties and neighborhood centers with grocery or other essential-businesses as anchors remained in strong demand throughout Q4 2021. Investor appetite broadened during the quarter, with more types of retail properties traded, including large-format retail (power and lifestyle centers). With rents returning to positive growth and limited new development occurring, the retail sector should continue to demonstrate increasing attractiveness to investors in the coming months.


Retail_Trends_Graph_Q4_2021

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


U.S. Retail Cap Rate Trends


Retail Cap Rate Report Table Q4 2021

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Retail Valuation Practice


CBRE is the largest national provider of real estate appraisal services in the country with more than 800 licensed appraisers in the United States. CBRE's retail valuation practice has drawn from this large talent pool with more than 50 licensed appraisers who specialize in retail valuation. These appraisers form the core of our retail valuation team and ensure an experienced professional is responsible for each assignment.
 

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