Commercial Property Cap Rate Q1 2014


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Colliers has released a Cap Rate Report for commercial properties across Canada.

According to Wikipedia:

"Capitalization rate (or "cap rate") is the ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value."

The Colliers report shows the cap rate for downtown and suburban offices, and for Class A and Class B buildings.  It also shows the trend in rates.

What are these classes?  The SquareFeetBlog offers these descriptions:

Class A. These buildings represent the highest quality buildings in their market. They are generally the best looking buildings with the best construction, and possess high quality building infrastructure. Buildings also are well-located, have good access, and are professionally managed. They attract the highest quality tenants and also command the highest rents.

Class B. Class B buildings are generally a little older, but still have good quality management and tenants. Often times, value-added investors target these buildings as investments since well-located Class B buildings can be returned to Class A  through renovation (facade and common area improvements). They should generally not be functionally obsolete and should be well maintained.

The Cap
Class C. The lowest classification of office building - older buildings (usually more than 20 years old), and are located in less desirable areas and are in need of extensive renovation. Architecturally, these buildings are the least desirable and building infrastructure and technology is out-dated. As a result, Class C buildings have the lowest rental rates, take the longest time to lease, and are often targeted as re-development opportunities.

For other important Cap Rates - click the link: "Cap" takes down Hydra agents at a rate of 1 every 7 seconds!!!.  Check out this elevator scene in the new Captain America The Winter Soldier movie.