| For all you mountain bikers, think of the blue line above as the course for experts; extremely bumpy with one wicked climb that’ll leave your legs burning. But the red line is a bit more subdued: a steady ride to start, one difficult climb to get your heart pumping, and a nice easy downward ride to end the trail. Yet both have one thing in common, according to Reis analyst Brad “Downhill” Doremus; despite the ups and downs, the starting line and finish line areroughly the same. After rising 160 bps in 2009, the 12-month rolling cap rate has been on a steady yet substantial decline since Q4 2009, falling 180 bps to 7.1% in Q4 2010. From Q4 2009 onward, the mean cap rate has bounced around, changing direction in each quarter. Changes in both cap rates have been significant over the past two years, but both rates sit around the levels generally observed from2006 to 2008. Of course, transaction counts are thin compared to the heyday of commercial real estate, but they are at least off their single-digit lows as investors eye stable, big city properties. |
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