Cap rates flattened in the second quarter, exhibiting a stabilizing investment climate for retail properties, according to CBRE.
The company’s National Retail Cap Rate Report for the second quarter estimates that the national cap rate on retail properties was 8.56 percent—matching its revised figure for the first quarter. (In May, CBRE had reported the first quarter figure as 8.34 percent.)
According to CBRE, “This data suggests the cap rate increases seen since early 2007 may be over for now. Most market participants indicate that rates are expected to remain at current levels or even decline in select markets.”
Cap rate trends varied by region. In the East and West regions, cap rates improved with 12 basis point and 37 basis point rate declines, respectively, from the revised first quarter figures to the second quarter. The West figure of 8.06 percent is the lowest for the region since the first quarter of 2009.
Meanwhile, the Midwest—which had posted the largest improvement in the first quarter of 2010 compared with the fourth quarter of 2009—took a step backwards. Cap rates there increased 36 basis points from the revised first quarter figure. In the South, cap rates rose by 41 basis points and reached a new high of 9.08 percent—slightly edging the previous high registered in the third quarter of 2009.
The cap rate data is based on the CBRE Valuation & Advisory Services (VAS) database. The data points are confirmed closed transactions, adjusted for assumed financing, and reflect overall market trends.