Capitalization rates have remained relatively flat from the end of 2023, with cap rates in the office, retail, and industrial sectors averaging at or near six percent. Multifamily cap rates have seen a significant jump, averaging 5.9 percent, the highest multifamily cap rates have been since 2016. Average cap rates are anticipated to stay near six percent in all sectors, though more deals are trading in the high six to low seven percent range, most notably in the office and industrial sectors.
Over the next few months, most investors will continue to hold capital as they patiently wait to see the outcome of the Fed’s meeting in September. The Federal funds rate has remained unchanged since July 2023 with the benchmark interest rate range currently between 5.25 and 5.5 percent. Inflation still remains somewhat elevated, but it is easing considering the consumer price index was 3.3 percent in June compared to 4.9 percent a year ago. This is a good indication that the Fed is preparing to make a rate cut in September, which would be the first cut in four years.
Subscribe to TOK Commercial's Boise MSA Investment Market updates, here.