Commercial Real Estate Cap Rates 2026: What's Trading and What Isn't
Cap rates and debt rates have been disconnected since 2022. As Treasury rates normalize, cap rates are starting to follow. The asset classes moving fastest are also the ones with the most attractive debt — knowing where you are in the cycle informs the buy/hold/sell decision.
Multifamily
Class B value-add: 6.0–6.75% caps in primary markets, 6.5–7.5% in secondary. Workforce housing trading tightest. Class A new construction lease-up: 5.25–5.75%.
Industrial
Last-mile distribution: 5.5–6.25% caps. Manufacturing/flex: 7–8%. Cold storage commanding premium pricing (5.0–5.5%) on long-WALT leases.
Retail
Net-leased single-tenant credit: 5.5–6.5% caps. Strip centers with grocery anchor: 7–8%. Unanchored strip: 8.5–10%. Power centers and class B malls: distressed, anything 9%+ pricing.
Office
Class A trophy in tier-1 markets: 6.5–7.5% caps. Class B suburban: 9–11%. Class B/C downtown: distressed, often non-priced or 12%+ when bid.
Hospitality
Select-service flagged hotels: 8–9.5% caps on stabilized cash flow. Limited-service economy: 9.5–11%. Full-service: case-by-case based on RevPAR recovery.
Financing implications
Sub-6% cap properties are leveraging at 60–65% LTV with 7–7.5% debt — negative leverage on year one, betting on rent growth. 7%+ cap properties pencil at 70–75% LTV with positive leverage from day one. The cap rate / debt rate spread matters more than absolute rate level.
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