June 2022 - What Are Your Cap Rate Expansion Assumptions?
Ie.. Denver multi family at 4.8% spot cap, now underwriting new acquisitions to exit cap at 5.8%, etc..
or inland empire logistics at 3.1% spot cap and underwrite to 4.0% exit cap
curious to see hear how your funds are changing the modeling assumptions these days
For office / retail, I'm looking for how properties have traded in the past month and going forward and using that as a proxy for future cap rates. I'm thinking that anything that trades now already has the steep SOFR curve priced in, so unless interest rates run out of control, I feel comfortable that the future cap rates will be +/i in a similar range of where they trade today.
I have a harder time with mulit. Cap rates are so low on multi, that I have concern of how they can remain feasible at these cap rates unless interest rates drop again. Cap rates got this low because debt was so cheap. They remained low because everyone is/was making sense of them by assuming huge rent growth in the coming years. How do we continue to make sense of that if interst rates remain where they are now and the economy slows down and we have to revert back to 3% annual rent growth again?
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starting to see 100+ cap rate expansion on multi
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