Cap Rates Stay Flat as Strip Centers, Senior Housing Outperform
According to Green Street's Q1 2026 Cap Rate Observer, cap rates across most US commercial real estate sectors remained stable quarter-over-quarter, but strip centers and senior housing emerged as clear outperformers. Strip center cap rates compressed by about 15 basis points, while senior housing asset values surged 13% year-over-year, nearly recovering to 2022 highs. Power centers saw even tighter cap rates, dropping 30-40 bps due to institutional demand. Data centers edged up 1% in value. In contrast, office, apartment, and single-family rental assets are considered expensive for average-quality inventory, with muted investor interest. Regional divergences were notable: apartments tightened in Southern California and the Bay Area but loosened in Seattle and Boston. Industrial remained steady in the mid-5% range, with select metros like Nashville and Columbus seeing compression. Self-storage values rose 2% after a sharp correction, with a 17% surge in St. Louis. The report emphasizes that sector selection, not broad market timing, is driving returns in the current disrupted rate cycle.
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