Valuing Industrial Assets: When Cap on Market May Not Be Enough

When it comes to valuing commercial real estate, professionals historically relied on metrics such as “Cap Rate” to arrive to the most logical and relatable value. However, market conditions over the past few years, with extraordinary increases in rents and spikes in interest rates have called into question the validity of the standard cap rate as a reference point, especially for Industrial assets which are typically triple net leased (“NNN”) to one or a few tenants. Facing this challenge, many have turned to a simple metric known as “Cap on Market” which. Is easily sourced from transaction data, and represented as ubiquitous across properties and markets. While many are utilizing this new valuing metric, the reality is, if often doesn’t work or translate back to how investors approach a deal.

WHAT THIS WHITE PAPER COVERS
In this white paper, our real estate valuation experts examine the problems with “Cap on Market” and alternative approaches to determining accurate and defensible value.