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By Erik Sherman via CRE Daily <— Click here to view complete article

CBRE’s midyear survey of over 200 brokers indicates cap rates may have hit their peak in early 2025, even amid a rollercoaster ride in Treasury yields.

By the numbers: The 10-year Treasury ranged from a high of 4.79% in January to a low of 4.01% in April, eventually settling at 4.24% by midyear. Despite the volatility, average all-property cap rates dipped slightly—down 9 basis points to 6.84%. Notably, cap rate movement was consistent across asset types, suggesting early signs of yield compression.

Sentiment shift: A striking shift from CBRE’s previous survey showed a growing share of respondents expecting no further cap rate movement. Across major property sectors, flat expectations dominated: 67% for CBD office, 70% for suburban office, and nearly 74% for suburban multifamily. Industrial (64.5%) and hotel (50%) followed similar trends. This marks a notable pause in the rising cap rate narrative that has defined the past two years.

By property class: While medians held steady, the spread between low and high cap rate estimates widened—especially for Class B and C properties. These assets continue to face upward pressure on yields, likely reflecting higher risk premiums and investor caution toward non-core inventory.

Zoom in: Geopolitical risk is creeping back into CRE decision-making. Tariff-related concerns led 57% of respondents to slightly downgrade their 2025 transaction volume expectations. Another 16% made significant cuts to their forecasts, citing uncertainty around U.S. trade policy. Only 3% were more optimistic about deal flow, showing that policy pressure could still chill the market.

➥ THE TAKEAWAY

The bigger picture: The market may be done chasing higher cap rates, but that doesn’t mean it’s back to smooth sailing. While some segments are stabilizing, a bifurcated market and geopolitical headwinds continue to challenge deal flow.