With Rising Interest Rates, Cap Rate Spreads Narrow

According to a recent Colliers Capital Markets report, multi-family and industrial cap rates may be negative as they relate to the currently rising interest rates. Cap rates have yet to increase in transactions. Sellers will likely hold onto their assets unless they need liquidity. My opinion, up until a few months ago it was a great time to be a seller. There was plenty of low-rate long-term financing and more Buyers than available properties for sale. Now it is getting increasingly expensive to borrow, and those paying all-cash know they are in the drivers seat and may expect discounted pricing. There are still many Sellers with last year’s pricing in their mindset, but more and more Buyers are now thinking next-year pricing which causes a market disconnect during this transition period.