& real Estate cycles

1 IntroductionCapitalization or cap rates play a central role in real Estate investment, financing and valuation decisions. Average market-wide cap rates are widely quoted and followed as a gauge of current real Estate investment market conditions. Cap rates received increasing attention in both industry and academic circles over the past decade, as real Estate established itself as a mainstream asset class that became more integrated with broader capital markets, on both the debt and equity sides. The resulting surge of capital into the real Estate sector over the last decade helped drive property values to historical highs and cap rates to new lows. The phrase cap rate compression was born as cap rates fell from the 8-10% range in the early 2000 s to 5-7% by 2006 (Exhibits 1 and 2).

confusion about and misinformation related to exactly how they are determined ... In what follows we study aggregate or average NCREIF cap rates, ... there is considerable divergence in current value and transaction cap rates through

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  Cycle, Real, Estate, Confusion, Aggregate, Divergence, Real estate cycles

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