Sticky valuations and low transaction volumes globally are reflected in a disparity between appraisal cap rates and transaction cap rates for commercial real estate, according to the Hines 2024 Outlook: Disciplined Capital, Prospects Ahead.

The lack of concrete transactional data means some appraisers — particularly those in the United States — have been conservative in marking down assets. “This can create a problematic cycle where the disparity between book value and potential market value perpetuates, leading to a scenario where transaction volumes remain low, and markdowns remain restrained,” states the outlook.

Office assets in the NCREIF Property Index during third quarter 2023, for example, had an average equal-weighted appraisal cap rate of 5.6 percent but an equal-weighted transaction cap rate of 8.0 percent, based on in-place income, for the 23 office properties sold out of the database. “In the industrial and apartment sectors, there remai