US Cap Rate Benchmarks by Market Tier & Property Type
Illustrative capitalization rate ranges across primary asset classes and metropolitan market tiers for educational underwriting reference.
Market Data Disclaimer
Cap rates shift continuously with capital market conditions. These ranges are educational benchmarks developed for instructional modeling and informed by commercial real estate valuation conventions alongside high-level qualitative observations in Newmark's 2026 Valuation & Advisory North American Market Survey — they do not represent direct statistical citations or actual trading quotes. Always verify current local pricing and actual trading cap rates with active local brokers and recent comparable sales before making investment decisions.
National Commercial Real Estate Cap Rate Benchmark Ranges (2026)
Universal national benchmark reference table spanning all 7 major commercial property sectors. Derived from Newmark Q1 2026 National Investor Survey (comprehensive ranges across Class A to C tiers) and The Boulder Group Q3 2026 Net Lease Market Report (6.92% national NNN average).
| Asset Class | National Benchmark Range | Primary Source & Methodology | Key Underwriting Notes |
|---|---|---|---|
| Multifamily (Apartments) | 4.50% – 7.00% | Newmark Q1 2026 Survey | Span covers gateway Class A (4.50%–5.25%) to secondary/tertiary Class B/C (5.50%–7.00%). Tightest institutional liquidity spread. |
| Industrial & Logistics | 5.00% – 7.50% | Newmark Q1 2026 Survey | Bulk modern distribution commands 5.00%–6.25%; shallow-bay and flex industrial trade wider at 6.50%–7.50%. |
| Retail (Shopping Centers & Malls) | 5.50% – 9.25% | Newmark Q1 2026 / JLL | Grocery-anchored neighborhood retail trades tightly (5.50%–6.50%); unanchored strip centers price with credit discount up to 9.25%. |
| Office Buildings | 5.75% – 11.25% | Newmark Q1 2026 Survey | Bifurcated market: Trophy CBD buildings trade around 5.75%–7.50%; commodity suburban Class B/C trade with elevated risk premium up to 11.25%. |
| Self-Storage Facilities | 5.00% – 9.00% | Newmark Q1 2026 / Cushman | Primary climate-controlled multi-story trades 5.00%–6.00%; tertiary drive-up facilities price 7.00%–9.00% reflecting month-to-month leases. |
| Hotel & Hospitality | 6.50% – 11.50% | Newmark Q1 2026 / CBRE Survey | Full-service gateway luxury prices 6.50%–7.50%; economy limited-service trades up to 11.50%. Note: CBRE hotel survey reflects narrower central tendency (7.0%–9.5% for select-service). |
| Single-Tenant Net Lease (NNN) | 6.00% – 8.00% | The Boulder Group Q3 2026 / CBRE Net Lease Survey | National overall net lease composite average is 6.92% (Retail 6.69%, Industrial 7.28%, Office 7.60% per The Boulder Group Q3 2026 report). Sub-tier: CBRE U.S. Net Lease Survey documents prime investment-grade corporate credit (e.g., McDonald's, CVS, 7-Eleven) trading down to 6.00%–6.75%; franchisee guarantees trade 7.00%–8.00%. |
Note: Wide ranges reflect the full national continuum across market tiers (Gateway Tier 1 to Tertiary Tier 3) and property quality (Class A to Class C). CBRE hospitality surveys indicate narrower central tendencies for select-service hotels (7.0%–9.5%) as footnoted. Select figures cross-checked against JLL and Marcus & Millichap market reports.
US Cap Rate Benchmarks by Asset Class (Educational Reference)
Note: Directional underwriting benchmark ranges for educational reference (informed by Newmark 2026 market survey and valuation conventions; not official transaction quotes)
| Property Type / Asset Subtype | Illustrative Benchmark Range | Market Dynamics & Underwriting Notes |
|---|---|---|
| Multifamily – Class A (Primary Markets) | 4.50% – 5.25% (Illustrative) | Tightest of all asset classes; institutional capital favors this sector |
| Multifamily – Class B (Secondary Markets) | 5.50% – 6.50% (Illustrative) | Most common range for typical value-add multifamily deals |
| Multifamily – Class C (Tertiary Markets) | 6.50% – 7.00% (Illustrative) | Higher yield, secondary/tertiary operational and vacancy risk within 4.50%–7.00% multifamily bracket |
| Industrial – Class A / Bulk Distribution | 5.00% – 6.25% (Illustrative) | One of the most resilient sectors post-2022 rate cycle |
| Industrial – Single-Tenant Net Lease | 5.25% – 6.00% (Illustrative) | Tightest industrial subtype, driven by credit tenant lease duration |
| Industrial Flex / Outdoor Storage (IOS) | 6.50% – 7.50% (Illustrative) | Wider range within 5.00%–7.50% industrial bracket reflecting tenant and lease-term variability |
| Office – Class A (CBD Trophy) | 5.75% – 7.50% (Illustrative) | Flight-to-quality trophy assets with modern amenities and long weighted average lease terms |
| Office – Class B (Suburban) | 7.50% – 9.50% (Illustrative) | Elevated pricing spread reflecting tenant concessions and rollover capital expenditure requirements |
| Office – Class C (Secondary / Value-Add) | 9.50% – 11.25% (Illustrative) | High-risk pricing in tertiary and secondary submarkets within 5.75%–11.25% office spectrum |
| Retail – Grocery-Anchored Centers | 5.50% – 6.50% (Illustrative) | Strong daily-needs foot traffic and credit anchor stability support tight yields |
| Retail – Unanchored Strip Centers | 7.00% – 9.00% (Illustrative) | Wide pricing spread within 5.50%–9.25% retail bracket depending on tenant mix and credit ratings |
| Net Lease – Investment-Grade Single Tenant (NNN) | 6.00% – 6.75% (Illustrative) | Backed by investment-grade corporate credit (CVS, 7-Eleven); CBRE U.S. Net Lease Survey documents 6.00%–6.75% sub-tier, while Boulder Group Q3 2026 reports composite national average of 6.92% (Retail 6.69%, Industrial 7.28%, Office 7.60%) |
| Net Lease – Non-Credit / Franchisee (NNN) | 7.00% – 8.00% (Illustrative) | Franchisee guarantees commanding risk premium within 7.00%–8.00% (upper tier of overall 6.00%–8.00% national NNN sector) |
| Hotel – Luxury / Full-Service | 6.50% – 7.50% (Illustrative) | Tighter pricing driven by leisure and premium travel demand in gateway markets |
| Hotel – Suburban / Select-Service | 7.50% – 9.50% (Illustrative) | Balanced yield profile for regional hotel operators (aligns with CBRE hotel survey) |
| Hotel – Economy / Limited-Service | 9.50% – 11.50% (Illustrative) | Higher cash yields compensating for operational volatility within 6.50%–11.50% hotel spectrum |
| Self-Storage – Class A (Primary Markets) | 5.00% – 6.00% (Illustrative) | Multi-story climate-controlled assets compressed close to multifamily yields |
| Self-Storage – Class B (Secondary Markets) | 6.00% – 7.50% (Illustrative) | Steady cash flow with value-add operational upside |
| Self-Storage – Class C (Tertiary Drive-Up) | 7.50% – 9.00% (Illustrative) | Higher yields within 5.00%–9.00% storage benchmark compensating for smaller population catchments |
| Medical Office | 6.00% – 7.50% (Illustrative) | Long clinical leases and strong healthcare credit support pricing |
| Data Centers | 4.50% – 5.50% (Illustrative) | Compressed sharply due to AI/cloud power demand; among the tightest commercial cap rates |
Cap Rate Variations by Metro Market Tier
Industry standards describe relative pricing variations across metropolitan areas using Market Tiers rather than prescribing static numbers per city. Gateway markets command tighter cap rates (75–150 bps lower), while tertiary markets trade wider to compensate for liquidity constraints.
| Market Tier | Representative Metros | Typical Pricing vs. National Average |
|---|---|---|
| Tier 1 – Gateway Markets | New York City, Los Angeles, San Francisco Bay Area, Boston, Washington D.C., Chicago, Seattle, San Diego, Miami | 75–150 bps tighter (lower cap rate) than tertiary markets; deepest capital pools, highest barriers to entry |
| Tier 2 – Major Secondary Markets | Austin, Dallas–Fort Worth, Houston, Atlanta, Denver, Phoenix, Nashville, Charlotte, Minneapolis, Philadelphia, Portland (OR) | Roughly at or slightly above national average; strong liquidity, sunbelt markets often see continued institutional capital inflow |
| Tier 3 – Growth / Emerging Secondary Markets | Raleigh–Durham, Orlando, Tampa, Salt Lake City, San Antonio, Sacramento, Las Vegas, Columbus, Indianapolis, Kansas City | Modestly wider than Tier 2, typically 25–75 bps above national average |
| Tier 4 – Tertiary Markets | Smaller metros not listed above (e.g., Memphis, Louisville, Oklahoma City, Fresno, Albuquerque) | Typically 150–250+ bps wider than Tier 1 gateway markets; thinner liquidity, longer lease-up timelines |
Interest Rate Dynamics, Risk Spreads, and Positive vs. Negative Leverage Mechanics
Last Updated: November 2026 · Verified by Peter
1. The Historical Spread Over the 10-Year U.S. Treasury Yield
In institutional commercial real estate underwriting, capitalization rates operate as a function of the risk-free benchmark yield (the 10-Year U.S. Treasury) plus an equity risk premium. Historically, prime Class A multifamily and industrial assets trade at a 175 to 250 basis point (bps) spread over the 10-Year Treasury. For secondary retail, suburban flex, or commodity office buildings, the required spread widens past 300 to 450+ bps to compensate for tenant credit risk, extended re-leasing downtime, and capital expenditure drag. When benchmark Treasury yields hover between 4.0% and 4.5%, entering into a deal below a 5.50% cap rate implies aggressive reliance on post-acquisition net rental growth.
2. Avoiding the Negative Leverage Trap: Loan Constant vs. Going-In Cap Rate
A critical mistake in commercial underwriting is comparing the nominal mortgage interest rate directly against the Going-In Cap Rate. For instance, securing a loan at 5.75% fixed interest on a 6.00% cap rate asset appears to offer a 25 bps positive spread. However, because commercial mortgages include principal amortization, a 5.75% loan amortized over 30 years generates an Annual Debt Constant (Annual P&I ÷ Loan Amount) of 7.00%. Because the 7.00% debt constant exceeds the 6.00% unleveraged yield, the debt exerts negative cash-flow leverage, compressing Year-1 Cash-on-Cash yields down to 4.0%–4.5% and reducing debt service coverage.
3. How Institutional Underwriters Adjust Benchmark Cap Rates for Individual Assets
Metropolitan benchmark ranges serve solely as an initial underwriting baseline. In practice, institutional investment committees adjust target capitalization rates by evaluating four micro-level asset attributes:
- Weighted Average Lease Term (WALT): Assets with under 3–5 years of remaining lease term require a 50 to 100 bps cap rate expansion to account for tenant turnover capital, leasing commissions (LCs), and concession downtime.
- Post-Closing Property Tax Reassessment: In states without personal income taxes (e.g., Texas and Florida), appraisal districts aggressively reassess taxable value toward 85%–95% of purchase price, shifting net yields downward if historical tax bills are used.
- Recurring Capital Replacement Reserves: Deducting mandatory recurring reserves ($250–$450/unit for multifamily; $0.15–$0.25/SF for industrial) directly before calculating sustainable NOI.
- Secondary Market Liquidity Spread: Expanding exit capitalization rate assumptions by 75 to 200 bps when transitioning from primary gateway metros to tertiary markets to protect refinancing viability.
Key Metro Cap Rate Benchmark Deep Dives
Explore detailed local economic drivers, asset-class spreads, and underwriting examples for high-volume investment markets:
Austin, TX
Illustrative example: Multifamily 5.25% - 6.00% · Industrial 5.50% - 6.25%
Miami, FL
Illustrative example: Multifamily 5.00% - 5.75% · Industrial 5.25% - 6.00%
Dallas - Fort Worth, TX
Illustrative example: Multifamily 5.50% - 6.25% · Industrial 5.60% - 6.30%
Phoenix, AZ
Illustrative example: Multifamily 5.40% - 6.15% · Industrial 5.50% - 6.25%
Frequently Asked Questions
Why don't you give an exact cap rate number for my specific city?
Precise, city-specific cap rate data for every property type is generally proprietary — it comes from paid databases like CoStar, Real Capital Analytics (RCA), or a local broker's active pipeline of comparable sales. Public industry surveys (like CBRE's) report at the market-tier or major-metro level, not for every individual city. This guide gives you a realistic starting range; from there, a local broker can help you refine it based on recent closed transactions.
How often does this data change?
Cap rates fluctuate with interest rates, credit spreads, and market liquidity. Major commercial real estate surveys (such as those by CBRE or Newmark) are published semi-annually, though their publication timing varies throughout the year based on survey cycles. This guide serves as an educational benchmark rather than a real-time index; it is reviewed periodically (last verified: September 2026). When underwriting active transactions, investors should always obtain current Broker Opinions of Value (BOV) and trailing 3–6 month closed transaction comps from local commercial brokers rather than relying on static reference guides.
Why is office so much wider than other property types?
Office has faced the most disruption from remote/hybrid work trends since 2020, leading to elevated vacancy in many markets and a wide gap between high-quality "trophy" assets (which still command strong pricing) and older, undifferentiated buildings (which have seen dramatic cap rate expansion, sometimes into double digits).
Methodology & Data Limitations
The cap rate ranges presented above are educational directional benchmarks intended for modeling practice and underwriting reference. They are broadly informed by the macro sector findings in Newmark's 2026 Valuation & Advisory North American Market Survey (for core multifamily, industrial, retail, and office sectors) synthesized with commercial underwriting conventions. These ranges represent instructional generalizations rather than verbatim figures extracted from proprietary databases. Historical materials from other industry groups are cited for qualitative background only. When underwriting specific properties, investors must perform localized due diligence and never rely solely on aggregated educational benchmarks.
Data Sources & Citations
- Newmark - 2026 Valuation & Advisory North American Market SurveyPublished: 2026-02-18 · Accessed: 2026-09-29
- Background context only (no direct exact figures used): Historical trends and general methodologies observed in past publications from CBRE, Nareit, Marcus & Millichap, Green Street, and CRED iQ. These are illustrative and do not reflect specific current data.