Cap rates will likely rise as interest rates tick up, possibly through next year, according to a new analysis from Moody's Analytics.
While multifamily and industrial have held steady, cap rates in the so-called "lesser-performing" sectors of office, retail and hotel have reacted to rate hikes. But analysts at Moody's do expect "some moderate bump" in cap rates across other property types in the near-term.
"There are strong opinions in the market both ways, that cap rates will go up significantly with rising rates, and others saying that cap rates will go down, and demand and expectations of rent growth will compress risk premiums," said Kevin Fagan, head of CRE Economic Analysis for Moody's Analytics. "We have taken a measured approach in our forecasting, trying to find a balance between demand for the sector with upward pressure from rates."
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