Office Cap Rates Fall 10 Basis Points From February

CRED iQ analyzed underwriting metrics for the latest 10 transactions that have been packaged into commercial mortgage-backed securities (CMBS). Our analysis examined cap rates, interest rates and debt yields. We further broke down these statistics by property type and then compared our results to CRED iQ’s previous report issued in February.  

Office cap rates ranged from 4.31 percent to 10.63 percent with an average of 7.34 percent, down 10 basis points (bps) from the February report (7.44 percent). Multifamily cap rates ranged from 2.65 percent to 8.61 percent with an average of 5.7 percent, which is down from an average of 5.91 percent from February. Retail cap rates ranged from 5.13 percent to 9.19 percent with an average of 6.28 percent, down 41 bps. 

Cap rates for industrial assets ranged from 3.67 percent to 7.5 percent with an average of 5.74 percent, which is down from 6.38 percent in the February print. 

Self-storage cap rates ranged from 4.5 percent to 8.2 percent with an average of 5.81 percent, which is down 41 bps from February. 

Hospitality cap rates ranged from 5.85 percent to 9.49 percent with an average of 7.95 percent, which is up from 7.31 percent in the first quarter.  The hospitality sector was the only property segment with an upward trajectory on average cap rates. 

Office interest rates ranged from 5.49 percent to 8.05 percent with an average of 6.61 percent, which is down 5 bps from 6.66 percent in the third quarter of 2024. 

Interest rates for multifamily loans in CMBS deals ranged from 5.24 percent to 7.52 percent with an average of 6.5 percent, which is also down 8 bps from 6.58 percent. 

Retail interest rates ranged from 5.23 percent to 7.60 percent with an average of 6.67 percent, which is up from an average of 6.51 percent in the February data.

Average interest rates for industrial assets ranged from 6.12 percent to 7.51 percent with an average of 6.81 percent, up from 6.38 percent in the middle of the first quarter.  

Self-storage interest rates ranged from 5.5 percent to 7.09 percent with an average of 6.47 percent, up 18 bps.  

Hospitality interest rates ranged from 5.54 percent to 8.5 percent with an average of 7.3 percent, up from 6.89 percent in the February numbers.

Debt yield trends for offices ranged from 10.2 percent to 36.2 percent with an average of 13.9 percent, which is up from 13 percent in February. Average debt yields for multifamily loans in CMBS deals ranged from 7.5 percent to 45.1 percent with an average of 12.9 percent, which is up 340 bps from an average of 9.50 percent in the prior quarter. Retail debt yields ranged from 8.3 percent to 21.5 percent with an average of 12 percent, which is up from an average of 11.6 percent in mid-first quarter.

Comparing loan volumes to our February report, the office segment saw a 123 percent increase in properties — the highest of all property types. Multifamily came in second with a 71 percent increase.  

Meanwhile, hospitality and industrial notched the greatest decrease in property/loan volumes at minus 78 percent and minus 76 percent, respectively. From a deal balance perspective, office saw the greatest increase since February (plus 92 percent), while industrial (minus 58 percent) logged the biggest decrease.

Mike Haas is the founder and CEO of CRED iQ.