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RealtyRates.com™ Reports Cap Rate Decline For All Commercial Property Types
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Added: 05/26/2004
Type: Summary
Viewed: 736 time(s)
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RealtyRates.com™ Reports Cap Rate Decline For All Commercial Property Types
Largely reflecting a continuing slide in Treasury rates to which most commercial real estate mortgages are indexed, composite method-weighted overall capitalization rate (OAR) indices decreased during the 1st Quarter of 2004 for all of the 11 property categories tracked as part of the Realtyrates.com™ Investor Survey.
Increases in some interest rate spreads over corresponding Treasuries (but sans corresponding upward movement in debt coverage ratios), were also noted with regard to some property types, but were offset by a widening of equity dividend spreads with minimums continuing to decline somewhat.
The most dramatic decrease was recorded by the Healthcare & Senior Housing sector, down a full 34 basis points to 10.60%, followed by the Mobile Home/RV Park/Campground sector with a 31 basis point decline to 9.18%, and the Golf sector with a 26 basis point drop to 10.12% on the heels of a 22 basis point decline the previous quarter.
According to RealtyRates.com president Robert Watts, "The across-the-board decrease in OAR indices marks a reversal of the heretofore prevailing roller coaster pattern that appeared to be largely a function of the Federal Reserve's manipulation of interest rates, combined with short-term market uncertainties. Last quarter, all but three of the 11 property categories exhibited declining OAR indices."
Overall capitalization rates reflect the relationship between a property's net operating income and sale price or value. As such, cap rates are widely utilized in the real estate industry to both measure a property's performance as well as estimate its value or probable selling price.
Headquartered in Bradenton, Florida, RealtyRates.com, operates a comprehensive, Web-enabled, integrated service designed to provide government agencies and private industry with timely investment, financial, and operating data essential to the evaluation, marketing, and disposition of income-producing property. The firm's three quarterly market data surveys are widely utilized by banks, commercial real estate professionals, investors, developers, and property tax assessment authorities throughout the country.
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