Intelligent Investment

U.S. Cap Rate Survey H1 2023

Interest rate volatility pushes up cap rates

July 26, 2023 10 Minute Read


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The H1 2023 Cap Rate Survey provides a fresh perspective of where market sentiment is trending.

Welcome to CBRE’s H1 2023 Cap Rate Survey (CRS). This survey was conducted in late May through early June 2023 and reflects transaction activity in the first half of 2023. While market conditions are fluid, the CRS provides a useful baseline and sheds light on how investor sentiment is evolving.

The CRS captures more than 3,000 cap rate estimates across more than 50 geographic markets to generate key insights from a wealth of data.

Please note that more than 200 CBRE real estate professionals completed the H1 2023 Cap Rate Survey. Given the current rapidly changing capital markets conditions, estimates may not reflect recent events or the most current market conditions. Readers should view all cap rate estimates within this context.

CBRE’s H1 2023 Cap Rate Survey* (CRS) reflects the experiences of CBRE’s capital markets and valuation professionals during the first half of 2023.

Estimating market cap rates remains challenging in an environment of constrained capital availability and very low sales volume. But as inflation slowly declines and the Fed nears the end of its rate-hiking cycle, we anticipate prices will generally stabilize toward the end of the year, with office values stabilizing in early 2024.

The H1 2023 CRS offers some guidance. The survey indicates that overall cap rates have increased more slowly compared with H2 2022.

  • Retail saw the smallest cap rate increase aided by improved fundamentals, income growth and attractive pricing.
  • Multifamily cap rates’ upward expansion also slowed but oversupply is a concern within some markets.
  • Industrial underwriting has grown more conservative for a similar reason.
  • Office cap rates widened most sharply as investors demanded greater pricing discounts amid an uncertain outlook.

If investors are correct in sensing that the Fed's hiking cycle may end soon, greater interest rate certainty could be a catalyst to bring buyers and sellers together. In that scenario, the next six months could bring greater transparency and liquidity.

*Survey was conducted from late May through early June.

Figure 1: Bond Yield and All Property Average Cap Rates

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Source: CBRE Econometric Advisors.

More respondents believe cap rates are peaking

Cap rate expectations are changing. The H1 2023 Cap Rate Survey reveals that many CBRE capital markets and valuation professionals believe yields will stabilize during H2 2023. This represents a clear reversal from the H2 2022 survey and could possibly be due to progress on inflation and a belief that the Fed’s tightening cycle will soon end.

This turnaround is noticeable within the multifamily sector as investor interest is beginning to gain traction. Meanwhile, the hotel and retail sectors are bolstered by a conviction in continued consumer spending. The outlook for industrial is mixed as anecdotal evidence suggests underwriting assumptions are becoming more conservative, especially for non-stabilized properties. Office remains an outlier as participants believe cap rates will continue to decompress.

Figure 2: How do respondents expect cap rates to trend during H2 2023? Share of respondents

Image of bar graph

Each bar represents property type delineation by class (e.g., A, B, and C), and investment style (e.g., Stabilized, Value-Add). Many respondents to the H1 2023 CRS believe that most hotel property types (e.g., Independent or Branded) will not see an increase in cap rate.
Source: CBRE Econometric Advisors.

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