What happens to CRE cap rates when the 10-year Treasury yield changes? According to a CBRE Econometric Advisors review of data since 1995, there are some relationships over time with variations by property type.

On average, for every 100 basis points change in the 10-year yield, cap rates shift in the same direction — higher yield, higher cap rates; lower yield, lower cap rates. From high to low, it's been 78 basis points for retail; 75 basis points for multifamily; 70 basis points for office; and 41 basis points for industrial assets.

The likely reason industrial had such low sensitivity to movements in the 10-year is an odd split of demand, according to CBRE EA. Before 2010, industrial wasn't in high demand by companies or by investors. As a result, there was less cyclical cap rate compression. On the other hand, during the pandemic, industrial became a hot commodity because of e-commerce. The sharply increased demand slowed cap rate growth, boosted NOI, and reduced risk premiums. The result was irony, with extremes of demand both low and high moderating macroeconomic pressures on cap rates.