Get CBRE Cap Rate SuRvey - CBRE United States

With interest rates expected to peak later this year, the end of cap rate expansion may be in sight for most asset types. CBRE forecasts that the federal funds rate will likely exceed 5% in 2023, falling to about 2% by 2025.

Capitalization rate, also referred to as cap rate, shows the ratio of the net operating income towards the property asset value. In the first quarter of 2022, the average cap rate of retail real estate in the U.S. was 6.14 percent.

Cap rates are calculated by dividing the property's net operating income (NOI) by its property asset value. Cap rates can provide valuable insight into a property.

A 7.5 cap rate means that you can expect a 7.5% annual gross income on the value of your property or investment. If your property's value is $150,000, a 7.5 cap rate will mean a yearly return of $11,250.

You can calculate the capitalization rate of a property by dividing the property's net operating income (NOI) by the current property value. Determine your property's NOI by subtracting your operating expenses from your total annual income.

To calculate the cap rate, you divide the property's expected income by its purchase price. In the Boston, MA real estate market, the average cap rate for investment properties is typically between 3-6%.

That said, many analysts consider a "good" cap rate to be around 5% to 10%, while a 4% cap rate indicates lower risk but a longer timeline to recoup an investment.1 There are also other factors to consider, like the features of a local property market, and it is important not to rely on cap rate or any other single ...

A “good” cap rate varies depending on the investor and the property. Generally, the higher the cap rate, the higher the risk and return. Market analysts say an ideal cap rate is between five and 10 percent; the exact number will depend on the property type and location.