Can’t make sense of this market. On one hand, you have record dry powder sitting on the sidelines, increased international interest in US RE that’s very willing to accept a low cap for “safety,” and low IR.
On the other, you have IR risk on the horizon, and pricing exhaustion from investors.
5 years ago, and 10 year ago before that, we all didn’t think cap rates should go lower, but alas. Where you do think Cap Rates go from here?
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They can go lower. Capital has to be deployed and the competition for non-RE private investments is only increasing . The situation reveals deep problems in the economy and a lack of innovation/technological progress that we are trained to ignore to the extent possible.
Short answer: always
Always what ? The fuck?
Yes, go look at cap rates in Hong Kong (at least pre-China take over during Covid), cap rates averaged in the 2-3% range for many asset types (with individual assets trading with a 1 handle at times)... they can fluctuate up a lot too.
And ponder this.... Hong Kong pegs their currency to the US dollar... so our monetary policy and fed rates are basically theirs!
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