SEPTEMBER 25, 2014

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U.S. cap rates continue to contract across property types

by Reg Clodfelter

Signaling both the strength of commercial real estate’s recovery as well as continued investor competition, cap rates compressed or remained essentially flat across most property sectors and U.S. cities in the first half of 2014, according to the latest survey from CBRE. What’s more, only a small handful of markets are expected to see rising cap rates in the second half of the year — and by a narrow margin of less than 25 basis points — as the firm predicts that as much as 80 percent of U.S. markets will see unchanged cap rates in the second half of 2014, while the remainder will see contractions.

By property type, the biggest contraction in the past six months was seen in high street retail, already one of only two property types with a cap rate under 5 percent (along with class A infill multifamily). High street retail cap rates dropped 36 basis points from 4.81 percent at the end of 2013 to 4.45 percent. Class A

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