Us commercial real estate market rebound predicted

Real estate investors are expecting a widespread rebound in US commercial real estate markets, according to a new analysis of the market.

Recent declines in cap rates appear to be signaling a commercial real estate rebound, indicating improved investor expectations of price growth in the market, according to a report from San Francisco Federal Reserve Bank.

The cap rate measures the ratio of net operating income to the price of a property and serves as a rough approximation of expectations regarding return on a property investment.

It can also be looked at as the commercial real estate equivalent of the price/earnings ratio of a stock, according to the bank. ‘The rent/price ratio is largely a function of interest rates and expected increases in the property’s price,’ it said.

Source: PropertyWire.com