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CBRE: Cap Rates Stabilize as Investor Confidence Grows
CBRE’s H2 2024 Cap Rate Survey shows that while investment activity remains muted, cap rates held steady to close out the year.
Jordan B.
February 27, 2025
Together with
Good morning. CBRE’s H2 2024 Cap Rate Survey shows that while investment activity remains muted, cap rates held steady to close out last year, with signs of improving investor confidence heading into 2025.
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Market Snapshot
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Holding Steady
CBRE: Cap Rates Have Largely Stabilized
Despite Treasury yield volatility, U.S. cap rates have largely stabilized, according to CBRE’s H2 2024 Cap Rate Survey.
Sentiment is improving: CBRE’s survey, based on 3,600 cap rate estimates across 50+ markets, reveals shifting investor sentiment, with most respondents believing cap rates have peaked. While market conditions remain fluid, the data offers a key benchmark for understanding trends heading into 2025.
Steady as she goes: Despite Treasury yield volatility, cap rates remained stable in H2 2024. The 10-year Treasury peaked at 4.7% in April before dropping to 3.6% in September, only to rise again as the Fed signaled fewer rate cuts than expected. Industrial and multifamily saw slight declines, while office cap rates rose due to ongoing distress.
Office distress: Cap rate spreads for office properties expanded in H2 2024, reflecting increased uncertainty—particularly in Class B and C assets. Class A office cap rates now exceed 8%, while distressed Class C properties are seeing rates climb into the low teens.
Peaking: After a 51% drop in 2023, CRE sales volume rebounded 9% in 2024, signaling improving sentiment. Fewer investors expect cap rates to rise, suggesting the market has adjusted to higher borrowing costs despite ongoing rate volatility. However, lingering policy uncertainties and inflation could still impact cap rate performance across sectors.
➥ THE TAKEAWAY
Looking ahead: While cap rate expansion appears to be slowing, uncertainty remains—especially in the office sector. With improving sentiment and expectations for increased transaction activity, 2025 could bring a more active investment market.
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✍️ Editor’s Picks
Luxury market resilience: Despite macroeconomic challenges, demand for second homes remains strong, with coastal and mountain retreats seeing the most significant growth. (sponsored)
Trump’s gold card: Trump plans to replace the EB-5 visa with a $5M investment-based residency program, potentially impacting real estate funding and raising legal questions.
In the driver’s seat: The top 10% of earners now account for nearly 50% of consumer spending, raising concerns about economic vulnerability if their spending declines.
Follow the lawyers: Newmark is suing former Chicago appraiser Bryan Younge for allegedly stealing confidential documents, including a key business database, before joining a competitor.
Legacy obstacles: New York builders await a long-overdue code update as the 2026 all-electric mandate nears, with industry pushback and state delays raising implementation concerns.
Boosted mezz lending: Banks are increasingly partnering with property owners on mezzanine loans, leveraging developer expertise and capital amid challenging economic conditions.
🏘️ MULTIFAMILY
Student towers: Austin may approve 600-foot towers near UT to tackle student housing demand, though concerns about affordability and an oversupplied rental market persist.
Rent goes down: Minimum wage earners now need 106 hours of work per week to afford rent, down from 125 in 2022, but affordability challenges persist.
Lucky number: Developer Paul Tran plans an eight-story, 222-unit apartment complex in Mid-Wilshire, using a density bonus to include 35 affordable units.
Starwood sells: Starwood Capital (STWD) sold the 344-unit Bridges at Crosstown for $76M to Bridge Investment Group, which is set to be acquired by Apollo (APO) for $1.5B.
🏭 Industrial
SoCal demand: Asian third-party logistics firms are ramping up US leasing, particularly near ports, to offset tariffs and meet growing e-commerce demand, boosting SoCal’s industrial market.
Phoenix industrial: LBA Logistics acquired a fully leased, 220K SF Class A industrial facility in Glendale, AZ, for $39M from Echo Real Estate and Grandview Partners.
What happens in Vegas: MDH Partners acquired two industrial properties in Las Vegas for $94M, marking its Nevada entry amid rising vacancy and slowing preleasing.
🏬 RETAIL
Wholesale hotspots: Costco (COST), BJ’s (BJ), and Sam’s Club (WMT) outpaced Target (TGT) and Walmart in 2024 visits, as wholesale clubs led growth amid shifting consumer preferences.
Wynwood site listed: Block Capital is selling a 16.8K SF Wynwood retail property for $16M, offering redevelopment potential for a mixed-use project up to eight stories.
Colonial conquest: Finmarc aims to acquire 1.3M SF of office and retail in the Northeast, building on 2024 momentum amid shifting market conditions.
🏢 OFFICE
Miami’s largest lease: Verizon’s TracFone is relocating to 51K SF at Waterford Business District, marking Miami’s biggest office lease of 2025 while downsizing from its former 145K SF HQ.
Demand rebounds: Office net absorption rose for three straight quarters in 2024, driving vacancy down to 16.7% as return-to-office policies boost demand, especially for Class A space.
4-day office return: San Francisco Mayor Daniel Lurie mandated city workers return to the office at least four days a week by April 28, aiming to boost downtown recovery.
20-year tax break: Philadelphia's Tax Reform Commission proposes a 20-year tax abatement for office conversions to combat high vacancy, alongside broader tax cuts to attract businesses.
🏨 HOSPITALITY
Doubling down: Billionaire Tilman Fertitta increased his Wynn Resorts (WYNN) stake to over 10%, fueling speculation about expansion amid the casino operator’s US growth plans.
Atlanta hotel sale: Apollo (APO) remains undecided on the future of the 763-room Courtland Grand Hotel, balancing renovations, cash flow, and potential sale amid rising competition.
📈 CHART OF THE DAY
Roughly 20% of the $4.8 trillion in outstanding commercial mortgages—totaling $957 billion—will mature in 2025, a 3% increase from 2024, per the Mortgage Bankers Association. Many loans originally set to mature in 2024 were extended into 2025, continuing a trend seen in prior years.
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