Think cap rates are crazy low? They could drop even more as investors battle to own CRE income streams, according to a new analysis from First American Financial Corporation. But the firm says cap rates may be reaching a cyclical bottom.

For most of the last 20 years, the average cap rate across office, industrial, retail, multifamily, hotel, and senior housing has been dropping and is now at a period low “due to today’s low interest rate environment and the limited supply of commercial real estate properties relative to strong post-pandemic demand,” Xander Snyder, senior commercial economist at First American, said in prepared remarks.

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