According to a First American Financial Corporation analysis, cap rates might finally start to recover some of their value. 

The firm's potential capitalization rate (PCR) model for the first quarter of 2022 "estimates capitalization rates based on the historical relationship between interest rates, rental income, prevailing occupancy rates, the amount of commercial mortgage debt in the economy, and recent property price trends."

As the company noted, inflation has stubbornly hung in, rather than being the "transient" phenomenon the Federal Reserve predicted it would be because of pandemic-induced supply chain issues. Eventually the Fed started tightening monetary policy, most recently raising its benchmark interest rates by 75 points, the largest single jump since 1994.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.