Source: Finance Yahoo —
SANTA ANA, Calif., April 14, 2022–(BUSINESS WIRE)–First American Financial Corporation (NYSE: FAF), the premier provider of title, settlement and risk solutions for real estate transactions and the leader in the digital transformation of its industry, today released First American’s proprietary Potential Capitalization Rate (PCR) Model for the fourth quarter of 2021. The PCR Model estimates capitalization rates based on the historical relationship between interest rates, rental income, prevailing occupancy rates, the amount of commercial mortgage debt in the economy, and recent property price trends.
Commercial Real Estate Economist Analysis: National Capitalization Rate at 20-Year Low
“Nationally, the average capitalization (cap) rate across all commercial real estate asset classes (office, industrial, retail, multifamily, hotel, and senior housing) is at a 20-year low, due to today’s low interest rate environment and the limited supply of commercial real estate properties relative to strong post-pandemic demand,” said Xander Snyder, senior commercial economist at First American. “Commercial real estate (CRE) investors have bid up prices to own the stream of income that commercial real estate properties can provide. Is it possible for prices to continue to increase? Or will inflation and a rising interest-rate environment reverse the long-term decline of the national cap rate and reduce the pace of price appreciation?”
