U.S. Capital Markets Glide Path to Clearer Skies

Which means cap rates go to 6.0% - 7.5%

CRE cap rates must adjust upward to remain attractive as a comparative asset class

Rule of thumb: Every 100 bps increase in cap rates results in a ~20% decrease in property values if there is no corresponding increase in NOI to offset that. This implies that property values will fall by ~40% from peak to trough.

Forecast

18

16

14

12

8 10

3.5% 5.0% 6.0% 7.5%

6

2 4

0

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

2013

2017

2021

2025

Baa Corporate Bond

All-Property Cap Rate (Institutional Grade)

All-Property Cap Rates (Overall)

Source: Federal Reserve, Moody’s Investor Services, NCREIF, MSCI Real Capital Analytics, Cushman & Wakefield Research. Note: *All-property cap rate comprised of industrial, multifamily, office and retail, weighted by each sector’s share of sales from 2018-2022.

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