About the Cap Rate Survey
CBRE is pleased to present its semiannual North America Cap Rate Survey for H1 2018, which reveals cap rates and pricing trends for all major property types in major markets across the U.S. and Canada. At the heart of the survey are current cap rates for stabilized acquisitions, expected returns on cost for value-add acquisitions, cap rate trends since the previous survey and expectations of cap rate movements over the next six months. What were cap rates in your market?
The Wall of Equity 'WACCs' Cap Rates
Higher Interest Rates + Late Cycle = Lower Cap Rates. Huh? For the 22+ years I’ve been in this business, investors have relied on the relationship between cap rates and interest rates. But perhaps it’s time for us to stop relying on conventional wisdom. Check out the CBRE Capital Watch Blog for Spencer’s take on when cap rates will act normally again.
“Cap rates really are a function of the weighted average cost of capital (WACC) and not just the cost of debt. While the cost of debt has gone up slightly, the cost of equity has dropped.”
U.S. Cap Rate Snapshot
Capitalization rates for U.S. commercial real estate assets were broadly unchanged in H1 2018, with the exception of some retail segments. Industrial cap rates tightened the most and multifamily rates edged down modestly. Office cap rates were generally stable and cap rates for hotels were also firm.
We expect cap rate stability in the second half of 2018. However, the sentiment of survey respondents varied by property type, segment, class and metro-tier grouping, with the retail sector experiencing the most mixed sentiment. Check out U.S. national-level cap rates and expected returns on cost.
U.S. Cap Rate Snapshot by Product
Cap Rate Snapshot by Market
One-page overviews of cap rates and expected returns on cost by property type, sector, class and/or segment for select U.S. Markets: