CBRE CAP RATE SURVEY

IN THIS ISSUE:
Overview
Office
Multihousing
Retail
Industrial
Hotels Hotel
Appendix
Appendix | Definitions
Cap Rate
Cap Rate Survey
February 2013
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The going-in cap rate usually refers to the initial yield and is calculated as the ratio of the projected net income in the first year of the holding
period over the acquisition price of the property. This measure also represents the investors’ income return in the first year, but also in subsequent
years if NOI remains stable.
Stabilized Property Cap Rates
To derive the cap rate for a stabilized property assume the asset is leased at current market rents and has an occupancy rate in line with the long-
run market average. Based on these assumptions, use the in-place NOI and the probable sales price to calculate the stabilized cap rate.
Cap Rates (Office, Industrial, Retail, and Hotel)
Cap rate ranges are best estimates provided by CBRE professionals based on recent trades in their respective market as well as recent interactions
with investors. The ranges represent those cap rates that a given property will trade at in this current market. Stabilized cap rates are based on
in-place NOI for the latest year, before being adjusted for reserves. Value-add cap rates are based on projected stabilized NOI. Actual cap rates
within each asset class will vary, occasionally outside of the stated ranges, based on asset location/quality and property-specific opportunities for
NOI enhancement.
Cap Rates (Multihousing only)
Cap rate ranges are based on an estimated NOI derived by annualizing the last 90 days of revenue and subtracting what buyers would estimate
as stabilized, year one expenses after adjustments for real estate taxes and reserves. Actual cap rates within each asset class will vary, occasionally
outside of the stated ranges, based on asset location/quality and property-specific opportunities for NOI enhancement.
Value-Add Property Cap Rates (Office only)
To derive the value-add cap rate use a sales prices that would be achieved by a property underperforming in its market, whether through
abnormally high vacancy rates or through rents below those that are currently being achieved in the market. Assume the property is then stabilized
to achieve market rents and an occupancy rate in line with the market’s long run average to arrive at a stabilized NOI. Use the stabilized NOI
when calculating the Value-Add Cap Rate.
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