Statistics have come in for the third quarter of 2014, and research shows that market capitalization rates have continued to fall. According to the Urban Land Institute, cap rates fell for by more than 5 basis points, the 19th sequential decline in cap rates since a high mark was hit in 2009/2010. In addition, interest rates have continued to hold at almost historic lows, further clouding the cap rate issue.
Investors have been left with a difficult decision; continue to pay exorbitant, continually rising prices for commercial real estate, or sit it out and wait for a correction. The problem, though, with sitting it out right now is that commercial real estate is still offering some of the best returns on investments. However, with The Fed ending their quantitative easing program, interest rates should begin to climb and other investments will become more attractive as a result.
Time will tell.
Below are the numbers for the third quarter courtesy of the ULI.
Average Cap Rates According to the Real Estate Research Corporation