The relationship of Commercial Real Estate’s Cap Rate and Federal Reserve’s 10-Year Treasury Rate
Commercial Real Estate’s Cap Rate is average 436 bps over 20 years reference to Federal Reserve's 10-Year Treasury Rate. In fact, its average from 1990 to 2000 is 450 bps and its average from 2002 to 2015 is 425 bps.
Transactions in 2015 are on course to exceed pre-recession peak levels, and most property sectors continue to see inflows of equity and disciplined underwriting by debt providers. With positive economic trends lifting gauges of property performance, commercial real estate remains a favored asset class on a risk-adjusted basis.
Another words, the sophisticate and savvy CRE’s investor are studying and analyzing carefully its Federal Reserve’s 10-Year Treasury Rate in order to make an informed decision on his next acquisition. It would help reduce his risk significantly.
Commercial property sectors continue to perform well amid this extended period of low interest rates and the Federal Reserve’s decision will not disrupt property performance
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