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Cap Rates Not on Same Path as Interest Rates’ Wild Ride

Cap rates for Q2 2019 were flat-to-declining nationally during a period of wild swings in the level of the 10-year U.S. Treasury, according to preliminary numbers from Real Capital Analytics (RCA). The key for commercial real estate investors though is not always what the overall numbers say, but to drill down to examine a local market where their portfolio is located.

RCA’s CRE economist Jim Costello writes, “Changes in the composition of what sells each period can introduce noise in national cap rate trends. If more deals are seen in markets that are typically inexpensive, or more deals are seen for assets that are older, cap rates might seem to be creeping upward.”

RCA is introducing a new tool in its US Capital Trends report that adds controls for quality issues in cap rate observations, and points to a generally flat trend in cap rates over the last year.

Costello notes, the issue of asset quality is “vitally important for the performance of retail property as there are clear winners and losers in this sector at the asset level. Looking at retail trends across markets using this quality-adjusted cap rate figure, few markets exhibited significant moves over the last year.”

The report also will point to a generally declining trend in sales volume for H1 2019, writes Costello. This dip will be seen for all sectors except office, apartment, and seniors housing and care.

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About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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