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Featured Article

In commercial real estate, cap rates are the pulse of the market—a direct reflection of investor sentiment, risk appetite, and cost of capital.

And right now?
That pulse is jumping.

Whether you're a net lease investor, 1031 buyer, or private equity-backed group, it’s critical to understand where cap rates are headed—and what’s driving the shift.

Let’s take a look.

📈 Quick Cap Rate Refresher

Cap Rate = Net Operating Income ÷ Purchase Price

Higher cap rate = lower price relative to income
Lower cap rate = higher price, more competitive demand

Cap rates expand when rates rise, risk increases, or investor demand weakens.
They compress when money is cheap and assets are hot.

🗺️ Cap Rate Movement by Region (2023–2025 YTD)

👉 Biggest spread between coastal urban markets (lower cap, higher price) and secondary/tertiary markets in the Midwest and South.

🏬 Cap Rate Trends by Asset Type

💡 What’s Driving the Shift?

• Higher interest rates: Cap rates must rise to reflect increased cost of debt

• Risk repricing: More scrutiny on tenant credit, lease rollover risk, and location quality

• Buyers are patient: Fewer aggressive 1031 buyers, more disciplined underwriting

• Asset bifurcation: Best-in-class assets still command premiums, but B/C properties are seeing steep discounts

🔮 What’s Next?

Expect continued softening in cap rates for most sectors, especially where lease terms are short or tenant risk is elevated.

But here’s the nuance:

• Absolute NNN with top-tier tenants in growth markets? Still trading aggressively.

• Leases under 5 years, or in saturated markets? Significant cap expansion.

• Value-add or redevelopment plays? Getting more attention from opportunistic buyers.

🧠 Bottom Line

Cap rates are more than a math formula—they’re a real-time read on market sentiment.

And in today’s market, understanding cap rate movement by region, asset type, and lease structure gives you a critical edge.

Need help pricing a deal—or stress-testing a sale?
Let’s run the numbers together.

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