Exit Cap Rates
What’s everyone using for exit cap rates in today’s environment? Specifically for class A office and retail?
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What market? WALT? Tenant profile? Size?
Class A office? 3%. Book it.
Ah, the conservative approach. I like it.
That depends on many different factors….
Can't just slap a cap on class A office, you realize the ARGUS valuations from Appraisals have many different factors, from hold years, analysis years, sale month, market leasing. all which will have a bigger difference between the 50bps difference on exits. Retail is slightly easier to gauge by where properties are trading and types of tenants e..g credit rating would be closer to a 5.5% to 7.5% for retail.
In Austin MSA suburban markets your built-to untrended YOC is typically 5.75%-6.5% and 4.50%-5% @ exit..bare minimum spread of 125 basis spread to maybe get a conversation started and 200 basis point spread to spark real interest.
Underwriting to a 5-cap exit on an Austin MSA office building is criminal.
Government bonds are yielding 5% untaxed.
Thought we were talking multifamily lmao…that’s what I’m seeing for BTR
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