Pricing Like It's 1999: Relative pricing between the office and apartment sectors raises questions (Abstract Only)

December 2017

Conditions in the commercial real estate sector remain largely positive, with economic growth producing solid levels of demand, and supply additions showing signs of moderating. Market expectations remain positive for the majority of property types, but vary according to the market’s perception of structural changes in the economy, demographics, and consumer preferences. These varying expectations are reflected in the current cap rates of each property type. While pricing in the industrial and retail sectors holds few surprises, the current relationship between office and apartment cap rates seems difficult to justify. In this quarter’s issue we explore the historical pricing relationship between the two property types, examine the degree to which it has changed, and discuss how we believe debt and equity investors may wish to respond.

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