From an article by Colliers International
The capitalization rate of a real estate investment is calculated by dividing the property’s net operating income by the current market value. It’s the most popular measure for how real estate investments are assessed for profitability and rate of return.
Our expectation is that they will start to go up, because people are going to start to see more risks. The days of looking at an asset and painting it with a broad brush . . . are evaporating.
However the greatest factor for cap rates universally is the strength of a landlord’s tenants to pay their rent.
Scott Bowden, the managing director of valuation and advisory services for Colliers International