Retail News Blog

A look at capitalization rates the past few months may leave you wondering where the value in your property has gone. Many property owners are sitting on properties that have lost 10 to 15 percent of their value in the past year. Chris Rodriguez of Retail Chatr stated it best in his recent article on Determining CAP Rates:

“Retail property prices are moving as fast as the stock market. It is almost impossible to accurately pinpoint a property’s value”.

His assessment has proven to be accurate as capitalization rates have been all over the board recently. According to Real Capital Analytics average capitalization rates in the Portland market have fallen from 8.5% in 2002 to a low of 6.44% in the third quarter of 2007. On a national level a similar trend has occurred, although nationally capitalization rates remained slightly higher overall than Portland during the decline. Ranging from 8.5% in 2002 to 6.55% in the third quarter of 2007; Portland capitalization rates have started to increase and now sit at above 6.6% on average at 2008’s year end. National capitalization rates bottomed out in the second quarter of 2007 at 6.51% and have also began to trend upward ending 2008 above 6.8% on average.

Moving forward in the commercial real estate industry is going to be a slow push in the coming months. With a decrease in buyers closing on properties in the market it’s guaranteed that many buyers are already apprehensive to throw down cash on a property that’s losing value in addition to the credit markets being tight. Real Capital Analytics recent compiled data for November of 2008 shows that only $603.87 million was closed compared to almost $3.6 billion in November of 2007. A significant drop in deals closed is due to the choke hold on the financial markets and buyers being ever so cautious in where they secure their money.