Cap Rate Spread
En español: Diferencial de la tasa de capitalización (cap rate spread)
The cap rate spread is the distance between property cap rates and the yield on the ten-year Treasury, the rate investors treat as risk-free. It measures what the market is being paid for taking real estate risk, and it is the cleanest explanation of why values move when rents have not.
- A thin spread means little compensation for illiquidity and management. It usually precedes a repricing rather than a boom.
- The spread can widen because the Treasury fell or because cap rates rose. Those are opposite markets with the same number.
- It is a market-level lens, not a property one. It explains the direction of value, never the value of a specific building.
- Cap rates lag rates. The Treasury moves in a morning; closed sales take two quarters to show it.
The same building, unchanged income, if the risk-free rate rises a full point and the spread holds where it was.
Not one tenant moved and not one dollar of rent changed. A point of interest rate took $228,500, and no negotiation was involved.
Related terms
All termsCap Rate (Capitalization Rate)
The capitalization rate is a building's net operating income divided by its price, expressed as a percentage.
InvestmentExit Cap Rate
The exit cap rate is the capitalization rate assumed when a projection sells the property at the end of the hold.
MarketsTransaction Volume
Transaction volume is how much actually traded in a market over a period, counted in deals, in units, or in dollars.
Terms arrive with the writing.
The glossary grows as the Journal does, one email when something worth reading goes up. No noise.
Unsubscribe anytime. See our Privacy Policy.