#caprates

Market watchers, get your binoculars out. Economic growth is expected to be slow in 2023 with 1.6% global, and just 1% US growth. BUUUT, the commercial real estate market is holding strong with 4-6% CAP rates on certain asset classes. DM me for details on how to get involved with commercial real estate investing. I do residential investments as well!

My point here is that if cap rates continue to compress, then multifamily will stop cash flowing and we will need to value these assets the same way that we value stocks that do not pay dividends. What will this method of valuing real estate look like? I don’t know but it won’t have anything to do with cash flow as a metric. People will pay more for the assets…just because?

In 1999, prior to the dot.com bust and 9/11, optimism about the commercial property market and a general bullishness about the economy pushed cap rate spreads low. Those spreads started to rise in 2000, such that when the unemployment rate began to climb one year later, spreads were already between 300 and 400 basis points. As the recession waned, the unemployment rate started to decline and within one quarter, cap rate spreads were already back at or below those levels. In 2007, prior to the Global Financial Crisis (GFC), competition among CRE investors and a thirst for yield pushed cap rate spreads to post-1995 lows. Apartment cap rates roughly matched 10-year Treasury yields. As unemployment began to climb, so did spreads, which spent most of the downturn between 300 and 400 basis points for most property types. They remained elevated even after the unemployment rate began to decline. Fast-forward to today, cap rate spreads are entering the current downturn close to the levels they rose to in each the previous two downturns. And that is before factoring in the 100 basis point drop in Treasury yields during this year’s first quarter. By this measure, cap rate spreads are already roughly where they rose to during the depths of both of the previous recessions. Coupled with a hope/expectation that this downturn may be sharp but short, it is possible that CRE cap rates may be relatively unaffected by the current crisis. Article courtesy of Jamie Woodwell Mortgage Bankers Association. To Sell, Buy or Invest contact Ed Bertha at (941) 921-2117 or [email protected] Burns & Bertha - Changing Lives - Red Line Investors - © 2020 www.DiscoverSuncoastHomes.com Read the full article

We spoke with Daniel Greenhalgh, one of our co-founders here at ENM Construction Management, and he provided some insights into the complexities of the cap rate.

no more please

no more please

no more please

no more please