Q4 2024 Average Cap Rate

Each month we add thousands of data points. For this past quarter, the top 5 markets with the lowest average cap rates were San Diego, San Francisco, Boston Los Angeles and Seattle while the 5 markets with the highest cap rates were Baltimore, Cleveland, Indianapolis, Detroit and Columbus. Cap rates appear to be on a slight upswing affected by raising interest rates and decreasing equity dividend rates. The average was 6.86% for Q4 2024.

The data indicates an increase of 24 basis point during the 4rd quarter 2024. While the trend has been up for 8 of the past 10 quarters, it has been down 2 of the past 4 quarters.

For class For Class A properties, between Q3 24 and Q4 24 apartments were +16 bps, Industrial +16 pbs, retail +18 bps and office +18 bps. There were differences between property types with, for example, the cap rate Q4 2024 for Class A suburban apartments at 6.1% compared to 7.78% for senior housing. Class A Warehouse space 6.55% outpaced flex space 8.39%. Suburban offices (7.33%) and medical offices (7.28%) performed better than CBD office space (8.07%).

Why NationalCapRates.com?

There are a number of good sources for commercial property capitalization rates. As appraisers we believe that local sales are typically the best place to start. As a support source we found ourself wading through reams of pdf reports looking for the best data to fit the property. We wanted something that we could quickly (say in under 60 seconds) log-in track-down and cut-and-paste to our reports. Not finding it, we decided to build our own. While technologically not possible just a few short years ago, today it is. So we went out and assembled a team to gather the data and develop a point-and-click distribution method, all at a reasonable cost.

Methodology - the Blended Caculated Cap Rate

The data collection process starts with actual sales. This is then combined with surveys of investors, brokers, lenders and appraisers from various qualified sources deemed to be reliable that are formulated into an average for general reference use. Once the baseline numbers are established, we calculate an adjustment for property class and local markets to arrive at a Blended Calculated Capitalization Rate. Most of charts are updated quarterly although some of the data (primarily from the sales analytical side) is update more often. Not every type of sales is available for every market every month. Thus we have created a formula that takes into account baseline sales and survey data and adjusted it to reflect historical differences between property classes and locational differences between various cities.

These numbers are updated to reflect, as best we can, an accurate representation of the where the cap rate is, or as calculated, what is should be. Think of this as sort of a Marshall Valuation Services for Capitalization Rates where baseline numbers are first established and then adjustments are made to the quality/class and location. This information is intended to give you an overall picture of the market. Each property is unique and must be viewed on it’s own individual features. Each community is different with sub-markets that can be vastly different. Judgments about the class of a property need to be made on a property-by-property basis by properly trained individuals. A great source to find a professional in your area is to search the Appraisal Institute directory. This web site does not and cannot attempt to identify the appropriate cap rate for a particular property. That is a task best left to trained and licensed individuals. What we do is provide a tool of what we believe is accurate and reliable information to help in the process. In our experiences, the best source for Capitalization Rates is from local sales of similar properties, individually identified and adjusted to the specifics of a property. This information is intended only to provide an overview of the market and perhaps offer secondary support to your primary findings.