Office Cap Rates Fall; Apartments See Rise

The WSJ reports that cap rates were mixed in July. For central-business-district office properties, average cap rates declined to 5.97% last month from 6.09% in June. But average cap rates for apartment buildings rose to 6.18% from June's 6.08%. The capitalization rate is a calculation of net rental income in the first year of ownership divided by the purchase price. The data are compiled by Real Capital Analytics, Inc. (see chart)


On another note, recent losses in the subprime market panicked investors who responded by rushing to the exits. Investor fear spread to commercial real estate markets despite solid real estate fundamentals and roiled the corporate bond markets notwithstanding a healthy overall economy. But the real panic came in the commercial paper market and money market funds.

The National Council of Real Estate Investment Fiduciaries is out with their second quarter NPI returns as follows:

• National - +4.59%
• Apartment - +3.26%
• Industrial - +5.14%
• Office - +5.93%
• Retail - +3.42%
• Best Region - West: +5.62%