National Retail Cap Rate Report
During fourth quarter 2020, the average cap rate for all retail transactions tracked by CBRE Valuation & Advisory Services recorded a slight contraction of 5 basis points. The overall fourth quarter average was 6.66%, which is an encouraging sign amidst the COVID-19 pandemic. Year over year, the average has decreased, with fourth quarter 2020 being 23 basis points lower than fourth quarter 2019. Among the six regions CBRE identifies, the average decreased in five (Midwest, Mountain, Pacific West, South Central, and Southeast) and increased in one (Northeast). The Pacific West region achieved the lowest cap rates for retail properties (averaging 5.66% in fourth quarter 2020), followed by Mountain (6.09%), Southeast (6.43%), South Central (6.77%), Midwest (7.15%), and Northeast (7.32%).
The data for fourth quarter 2020 is considered a generally positive signal for retail properties overall, but regional data suggests mixed results: five regions reported cap rate declines while one increased rather significantly. Cap rates have been relatively stable overall since 2017; thus, this quarter’s increase in the Northeast region may not reflect a change in trend, but may be an outlier based on the inventory that traded. Generally, all of the data this quarter and last confirm that massive pricing changes have not occurred due to the pandemic. Sales reported as closed during the past quarter were predominantly negotiated after the pandemic’s start and reflect willing buyer and seller knowledgeable of its impact. Most of the sales reported during the past quarter have been single-tenant net-leased properties or grocery- and other-essential-business-anchored centers that have remained in demand without rent roll uncertainty that has surrounded other property types. As more types of retail properties trade, especially large-format retail (power and lifestyle centers and malls), cap rates will likely reflect some upward shifting, even as single-tenant and essential-anchored centers will remain stable.
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 Valuation Practice
CBRE is the largest national provider of real estate appraisal services in the country with more than 550 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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