{"id":50177,"date":"2026-06-14T21:42:23","date_gmt":"2026-06-14T18:42:23","guid":{"rendered":"https:\/\/www.commercialcafe.com\/blog\/?post_type=glossary_term&p=50177"},"modified":"2026-09-21T17:22:08","modified_gmt":"2026-09-21T14:22:08","slug":"capitalization-rate","status":"publish","type":"glossary_term","link":"https:\/\/www.commercialcafe.com\/blog\/glossary\/capitalization-rate\/","title":{"rendered":"Capitalization Rate"},"content":{"rendered":"

The capitalization rate (cap rate) is a fundamental commercial real estate metric used to estimate the potential return on an investment property. It is calculated by dividing a property’s net operating income (NOI) by its current market value or purchase price, expressed as a percentage.<\/p>\n

Cap rates serve as a quick benchmark for comparing properties and reflect both the income yield and the perceived risk of an investment. Lower cap rates generally indicate lower risk and higher property values (typical in prime markets), while higher cap rates suggest higher risk or less desirable locations. Cap rate compression over time reflects market appreciation.<\/p>\n","protected":false},"excerpt":{"rendered":"

The capitalization rate (cap rate) estimates a property’s return by dividing net operating income by its market value or price.<\/p>\n","protected":false},"template":"","glossary_category":[8643],"class_list":["post-50177","glossary_term","type-glossary_term","status-publish","hentry","glossary_category-finance-valuation","wpautop"],"acf":[],"yoast_head":"\nCapitalization Rate | CRE Glossary<\/title>\n<meta name=\"description\" content=\"How the cap rate works in commercial real estate: dividing NOI by value to compare properties, gauge risk, and read market appreciation.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialcafe.com\/blog\/glossary\/capitalization-rate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Capitalization Rate\" \/>\n<meta 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