According to CBRE, the commercial real estate market is showing signs of stabilization as cap rates approach their peak levels. Despite challenges such as stricter lending standards and potential market distress, the firm’s latest survey reveals an increase in average cap rates from 6.4% to 7% in the second half of 2023 across various property types.
The survey closely monitors pricing trends for major property sectors in the U.S., highlighting how rising bond yields have led to accelerated expansion of cap rates. However, data from both the survey and broader capital markets activity suggest that yields may soon reach their peak.
CBRE’s global president of valuation & advisory services, Tom Edwards states that despite tighter lending standards, there has been resilience in the commercial real estate market. He also notes that with lower bond yields and indications that Fed rate hikes are coming to an end, investors can adapt strategies to take advantage of stabilizing conditions and generate favorable risk-adjusted returns.
