Cap rates remain elevated nearly six years into the current expansion, but the headline number tells only part of the story. In this week’s report, BGO chief economist Ryan Severino examines the components beneath cap rates — the risk-free rate, expected net operating income (NOI) growth and the real estate risk premium — to explain why today’s market demands greater selectivity. With borrowing costs still restrictive, growth varying widely by sector and risk premiums tightening from recent stress-period levels, returns increasingly depend on disciplined underwriting, a visible income-growth path and the right basis.
To read the full report, click here.
