| The mean cap rate for the Chicago retail sector skyrocketed in Q4 2010, rising to 11.8% from 8.6% in Q3, according to Reis analyst Brad Doremus. The massive jump is certainly jaw-dropping, though the metro’s transaction total was miniscule, the lowest observed in at least the past five years (measured both by dollar volume and total transactions). Slim transaction volume over the past couple of years has produced very volatile cap rates, as expected. The 310 bpsincrease in Q4 was similar to the 280 bps increase in Q3 2009, though this jump was from a low of 6.5%. However, the metro’s 12-month rolling cap rate exhibits a much more stable trend, ticking up for the first time in over a year to 8.1% in Q4. Between Q3 2009 and Q3 2010, it held firm at 7.8%, and only vacillated between 7.6% and 7.8% in the three quarters prior. |
CAP RATE CATAPULT
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Brad Doremus
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