Green Street: Are Cap Rates Heading Up?

A recent survey by Newport Beach, CA-based Green Street revealed more than 70% of respondents believe real estate values will be flat or go up in the next 12 months. That optimism was credited to a strong economy. Despite a potential trade war, growth is expected to pick up this year into next, as tax cuts and deficit spending take effect.

Green Street’s Joi Mar says to expect inflationary-type rent growth for the near future. Most property sectors, with the exception of retail, are experiencing some level of rent growth. Green Street expects annual growth in Market Revenue per Available Foot (M-RevPAF) to be between -1% and 5% annually over the next five years, with industrial at the high end, and strip centers at the low end.

Nominal cap rates in most of the major property sectors appear to be inching up, notes Green Street, with the exception of industrial. Bid-ask spreads have widened, and investors are more hesitant to buy and sell. Transaction volume is down this year, and would be even lower if not for the extremely accommodative debt markets, points out Mar.

Green Street believes real estate pricing is “probably a little stretched,” with values expected to trend slightly lower and cap rates continuing to inch higher over the next six to 12 months. Net operating income growth will offset some, but not all, of that cap rate move.

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About Dennis Kaiser

Dennis Kaiser is Vice President of Public Relations and Communications for Connect Creative. Dennis is a communications leader with more than 40 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect Creative’s agency client services and is involved in a range of initiatives ranging from public relations and content strategy, communications and message development, copywriting, media relations, social media and content marketing services. Prior to joining Connect Media in 2015, his most recent corporate communications roles involved leading a regional public relations effort across Southern California for CBRE, playing a key marketing role on JLL’s national retail team, and directing the global public relations effort at ValleyCrest (BrightView), the nation’s largest commercial landscape services company. He has worked on marketing communications assignments for such CRE companies as Blackstone/Equity Office, Carlyle, Caruso, Disney Resorts, GE Capital, Irvine Company, Hines, Howard Hughes Corp., Jeffries, Lennar, MGM, Marcus & Millichap, Prologis, Raleigh Studios, Simon, Starwood, Trammell Crow Company, Transamerica, UBS and Wynn Resorts. Dennis has also worked on communications and launch strategies for a number of consumer electronic, media and tech brands including SlingMedia, Channel Master, Deluxe Media Entertainment, BeIn Sports, EchoStar and Sprint. Dennis’s agency background included firms such as Off Madison Ave., 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, Boy Scouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and the Thunderbirds Charities.

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