The average cap rate for retail properties nationwide moved up 11 basis points (bp) between the fourth quarter of 2015 and the first quarter 2016, to 6.59%, according to a recent report from commercial real estate services firm CBRE. Still, the figure represented a 13 bp year-over-year decrease.
Retail properties located in the Eastern United States experienced the biggest quarter-over-quarter jump in cap rates, 16 bp to 6.29%, CBRE research shows. On the other hand, cap rates on retail properties in the Midwest moved the least during the same period, 4 bp to 6.84%.
Cap rates on retail properties in the South increased 5 bp to 6.68%, and cap rates on retail properties in the West moved up 8 bp to 6.23%.
In its 2016 “ViewPoint,” Integra Realty Resources (IRR) projects that over 50% of retail markets will see cap rates remain constant for 2016. About 25% of markets across the United States is predicting cap rates will decrease marginally in 2016. Among top markets expecting an increase in cap rates are Miami, Los Angeles and Atlanta. Relatively strong cap rate compression is expected in Chicago for neighborhood retail properties. IRR’s survey discovered that the Florida retail markets of Tampa, Orlando, Naples and Sarasota are expected to experience cap rate compression in 2016.