Are CAP Rates Good for Commercial Space?
Capitalization rates, or CAP rates, are analyzed to provide both a buyer and a seller with some basic information on how commercial real estate value is based on the interest income that is generated by the property per year relative to the net investment. Although these valuations are only an estimate and may fluctuate from day-to-day based on real estate stocks, there is seldom a factor that is as debatable as the CAP rate when deciding to buy or sell commercial real estate.