What Is a Good Cap Rate in 2026?
Cap rate benchmarks shift with interest rates, market conditions, and asset class. Here's where cap rates stand across commercial real estate in 2026 and what they mean for your acquisition strategy.
Cap rate benchmarks by asset class in 2026
There’s no single “good” cap rate — what counts as attractive depends entirely on the asset class, market tier, property quality, and your investment strategy. A 5% cap rate on a Class A industrial distribution center in Dallas is a different proposition than a 5% cap on a Class B office building in a secondary market.
That said, cap rates in 2026 reflect the interest rate environment and capital market dynamics that have evolved over the past several years. After the rate increases of 2022–2024 pushed cap rates higher across most asset classes, the market has found a new equilibrium. Here’s a general framework for where cap rates sit today.
| Asset class | Class A / primary | Class B / secondary | Value-add |
|---|---|---|---|
| Industrial / Logistics | 5.0% – 6.5% | 6.5% – 8.0% | 7.5% – 9.5% |
| Multifamily (5+ units) | 4.5% – 5.5% | 5.5% – 7.0% | 6.5% – 8.5% |
| Retail (NNN) | 5.5% – 6.5% | 6.5% – 8.0% | 8.0% – 10.0% |
| Office | 6.0% – 7.5% | 7.5% – 9.5% | 9.0% – 12.0%+ |
| Self-Storage | 5.0% – 6.0% | 6.0% – 7.5% | 7.0% – 9.0% |
Ranges are approximate and vary by submarket, tenant quality, lease term, and property condition. Always verify against local comparable sales.
What drives cap rates higher or lower?
Interest rates are the primary external force
When borrowing costs rise, investors demand higher returns (higher cap rates) to compensate. When rates fall, cap rates tend to compress as cheaper financing makes properties more affordable and competitive bidding pushes prices up.
Tenant credit and lease term directly impact risk
A single-tenant NNN property leased to a credit-rated tenant for 15 years will trade at a much lower cap rate than a multi-tenant property with short-term leases and local tenants. The longer and more certain the income stream, the lower the cap rate investors will accept.
Market tier and location matter enormously
Primary markets (Dallas, Atlanta, Phoenix, Nashville) command lower cap rates than tertiary markets because of deeper tenant pools, stronger rent growth, and more liquid exit markets. A 6.5% cap in a strong logistics submarket is very different from a 6.5% cap in a rural secondary market.
Property condition and capex requirements push cap rates higher
A building with deferred maintenance, an aging roof, or HVAC systems nearing end-of-life requires capital investment that effectively reduces the buyer's real return. Investors price this risk into a higher cap rate.
How to evaluate whether a cap rate is “good”
Rather than asking “is this cap rate good,” ask these three questions.
Is it consistent with comparable sales?
Pull recent closed transactions for similar properties in the same submarket. If comparable industrial buildings are trading at 6.5–7.5% and you're looking at a 7.0% cap, the pricing is market-consistent. If you're at 5.0% with no obvious justification, something's off.
Does it provide positive leverage?
Compare the cap rate to your all-in borrowing cost (interest rate plus amortization). If you're buying at a 7% cap and borrowing at 6% all-in, you have positive leverage — the property earns more than the debt costs. If the cap rate is below your cost of capital, you're counting on appreciation to make the deal work.
Does it compensate for the risk?
A 6% cap on a well-leased industrial building with 8 years of remaining term is a different risk profile than a 6% cap on a multi-tenant office with 2 years of remaining term. Make sure the return matches the risk you're taking on.
Frequently asked questions
What is a good cap rate for commercial real estate in 2026?
It depends on asset class and market. Industrial properties in strong markets trade at 5–7%, multifamily at 4.5–7%, retail NNN at 5.5–8%, and office at 6–10%+. Value-add opportunities command higher cap rates across all asset classes. Always compare to local comparable sales rather than national averages.
Is a 7% cap rate good?
A 7% cap rate is solid for many commercial property types in 2026 — it generally provides positive leverage against current borrowing costs and indicates a reasonable risk-return profile. For Class A industrial in a primary market, 7% would be considered high (potentially a bargain or a red flag). For a Class B office building, 7% might be tight. Context matters.
Are cap rates going up or down in 2026?
After expanding in 2023–2024 due to rising interest rates, cap rates have largely stabilized in 2026. Industrial and multifamily cap rates have compressed slightly as investor demand returned. Office cap rates remain elevated due to ongoing occupancy concerns. The direction from here depends on interest rate policy and capital flows.
Why do industrial properties have lower cap rates than office?
Industrial has lower cap rates because it's perceived as lower risk — strong demand from e-commerce and logistics, simpler building systems, lower capex requirements, and tenants with high switching costs. Office faces headwinds from remote work, higher buildout costs, and shorter lease terms, which increases risk and therefore cap rates.
Should I buy at a higher or lower cap rate?
It depends on your strategy. Lower cap rates mean more stable income but less current yield — you're paying a premium for safety. Higher cap rates offer more yield but typically come with more risk (shorter leases, weaker tenants, capex needs). Core investors target lower caps; value-add investors target higher caps with a plan to create value.
Final thoughts
A “good” cap rate is one that accurately compensates you for the risk of a specific property in a specific market — not a universal number that applies everywhere. The best investors don’t chase cap rates; they understand what’s behind them and make decisions accordingly.
DealWise AI calculates your going-in cap rate automatically. Pair it with comparable market data to determine whether your deal is priced right.
Related guides
Exit cap rate
The assumption most of the return rests on, and how far 50 basis points moves it.
What is cap rate?
Full breakdown of the cap rate metric.
How to read an offering memorandum
Contractual, reported, asserted — and the cap rate trap that costs six figures.
What is NOI?
The income number that drives cap rate.
Cap rate vs NOI explained
How these metrics work together.
How to calculate cap rate
The step-by-step calculation, from rent roll to result.
Cap rate formula, example and calculator
Three worked deals and the reverse formula for valuation.
Commercial real estate metrics
Every CRE metric explained in one guide.
A benchmark tells you the range. Underwriting tells you the deal.
DealWise AI derives NOI from the rent roll and reports the going-in cap rate it supports. Free to start.