US Commercial Real Estate Cap Rates Hold Steady in Late 2024

According to CBRE’s H2 2024 Cap Rate Survey, commercial real estate cap rates have generally stabilized during the second half of 2024, with variations across different property sectors and strategies. This stabilization comes after a period of volatility influenced by fluctuating Treasury yields throughout the year.

Key Findings

• Treasury yield volatility: The 10-Year Treasury yield started 2024 below 4%, peaked at 4.7% in April, dropped to 3.6% in September, then reversed course in Q4 due to Fed signals of fewer future rate cuts than expected. This pattern continued into 2025 as the large federal budget deficit, policy uncertainty, and varying inflation signals kept bond markets guessing but with an upward bias.

• Sector-specific trends: Property types did not move in unison, with industrial and multifamily cap rates declining as NOI growth prospects improved. Office yields remained an outlier with continued upward pressure due to financial distress in the sector.

• Market sentiment: The survey indicates most respondents believe cap rates have peaked. The share of respondents expecting further yield increases has fallen compared to previous surveys, with “No Change” being the most common response across all property categories.

• Office market bifurcation: While the outlook for offices has improved compared to a year ago, a notable recovery has taken hold within CBDs in gateway cities, particularly for prime properties. The outlook remains less certain across suburban submarkets with fewer prime spaces and weaker fundamentals.

Office Sector Challenges

Office properties experienced the most pronounced yield expansion, with cap rates increasing by approximately 20 basis points. Class A office yields have widened and now exceed 8%, while less competitive Class C spaces are seeing distressed pricing with cap rate estimates averaging in the low teens.

The differential between respondents’ lower and upper cap rate estimates has increased considerably for the office sector, suggesting greater uncertainty in pricing. This uncertainty is most pronounced within the Class B and C segments.

Multifamily and Industrial Bright Spots

Both multifamily and industrial sectors showed strength in the survey, with cap rates falling on average as the prospect for NOI growth improved. In many markets, Class A multifamily properties in both infill and suburban locations saw cap rate compression compared to H1 2024.

Similarly, the industrial sector continued to perform well, with Class A industrial properties in prime markets like Los Angeles, Central New Jersey, and Northern New Jersey seeing some of the lowest cap rates (4.75% – 5.25%).

Regional Variations

The survey revealed significant regional variations in cap rates. Gateway markets like Boston, New York City, and San Francisco continued to command premium pricing (lower cap rates) in most property sectors, while secondary and tertiary markets generally showed higher yields.

The survey, which captured 3,600 cap rate estimates across more than 50 geographic markets, suggests that repricing has ended for most sectors. Sales volume is expected to trend upward during 2025, following a 9% increase in 2024 after a 51% decline in 2023.

More than 200 CBRE real estate professionals contributed to the survey with their real-time market estimates between November and December 2024. The comprehensive data provides a useful baseline for understanding investor sentiment, though CBRE acknowledges that market conditions are fluid and may change due to exogenous events or current market dynamics.

As the commercial real estate market navigates through 2025, these stabilizing cap rates may signal increased transaction activity as buyers and sellers find more common ground on asset valuations after a period of adjustment.