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Q3 Report Shows Cap Rates Rising

And sales are off 68% from the same period last year.

By John McCloud | Updated on December 10, 2008

Cap rates rose to 7.3% for warehouse properties and 7.2% for flex properties in Q3, according to Grubb & Ellis. The former was up 50 basis points and the latter 30 basis points from a year ago. Industrial property sales totaled $4.7 billion in the quarter, off 68% percent from last year, but the broker does not expect a comparable drop in the current quarter.

Investment returns averaged -0.01% (unleveraged) for institutional grade properties, compared with 3.19% 12 months earlier. G&E anticipates further deterioration. The Q3 vacancy rate of 8.5% was up from 7.6% last year and is expected to go higher as developers continue to deliver new space despite reduced tenant demand.

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