Capitalization Rate
Studies

The assignment examines capitalization-rate evidence from comparable sales, market sources, and investor expectations, and interprets what rate is appropriate for a defined property and market. The conclusion is a supported cap rate (or range), tied to the income basis and assumptions used. The analysis makes explicit the income measure (e.g., net operating income), the assumptions about risk, growth, and expense structure, so the rate is applied consistently.

Owners, investors, and their advisors use cap-rate studies to support a value conclusion, to evaluate a transaction price, or to understand investor expectations in a market. Lenders may request them to assess the reasonableness of a rate underlying a valuation. For example, an investor evaluating an acquisition may want a supported view of the cap rate to apply to the property's income.

The analysis considers comparable sales with known income and prices, market surveys and investor sources, the property's risk profile, lease structure and expense responsibility, growth expectations, and financing conditions. The rate is specific to the income basis and assumptions; a cap rate is not meaningful without defining the income to which it applies. The conclusion depends on the selected assumptions and available evidence.

We begin by discussing the property and the question the study answers to confirm the income basis and assumptions. After agreeing on scope, we research comparable transactions and market sources, analyze the evidence, and develop a supported cap-rate conclusion. We deliver a written analysis stating the income basis, assumptions, data relied on, and conclusion, with scope, fees, and timing depending on the property and market.