The first quarter of 2026 closed with cap rates moving in three directions at once. Industrial last-mile and grocery-anchored retail compressed modestly. Office continued its slow grind wider. Multifamily held a tight band but with widening intra-market dispersion that is now the more important story than the headline average.
1. Executive summary
Five takeaways
- Multifamily Class A in gateway markets compressed 8 to 14 basis points QoQ as institutional capital returned. Sun Belt secondary cities held flat or widened.
- Industrial bifurcation hardened. Last-mile sub-250k sf trades inside 5.25 percent in core markets. Big-box 500k+ sf is pricing 75 to 100 basis points wider.
- Office decompression slowed but did not stop. Suburban Class B widened another 22 basis points YoY. CBD trophy assets held within a tighter band as bid-ask narrowed.
- Retail strip and grocery-anchored centers compressed for the third consecutive quarter. Power centers continued to widen against the curve.
- The 10Y to MF cap spread sits at 155 basis points versus a 10-year average of 280. Entry pricing remains tight relative to the cost of debt for any deal that requires a refinance exit.
2. The Treasury spread context
The 10-year Treasury closed Q1 at 4.30 percent. Average multifamily going-in cap across the 25 MSAs we track sits at 5.85 percent. That is a 155 basis point spread. The 10-year historical average for that spread is 280 basis points. The post-2022 era, in other words, is structurally different from the long sample.
What this means in practice: an institutional buyer financing 60 percent at agency pricing in the high 5s on a stabilized Class B asset is looking at a negative leverage position at year one. The deal works if the rent growth thesis is correct and if the exit cap is not punitive. Both assumptions are doing a lot of work.
For LPs, the 155 basis point spread is the single most important number to internalize. It tells you that current pricing assumes a return to normalcy in the 10-year, a continuation of supply absorption in the asset, or both. If neither happens, the math breaks.
The MF to 10-year spread last sat below 150 basis points in Q2 2022, immediately before the Fed tightening cycle drove cap rates up. The spread compressed not because caps tightened but because the 10-year rose faster than caps could reprice. We are watching for a similar dynamic in 2026, in reverse.
3. Top 25 MSAs by asset class
The table below shows going-in cap rate ranges for stabilized institutional-quality product. Multifamily is Class B core. Industrial is multi-tenant logistics. Office is suburban Class A. Retail is unanchored neighborhood centers. QoQ and YoY columns show the midpoint movement.
| MSA | Going-In Range | QoQ | YoY |
|---|---|---|---|
| New York | 4.95% to 5.45% | v -10bps | v -22bps |
| Los Angeles | 4.85% to 5.35% | v -8bps | v -18bps |
| Chicago | 5.85% to 6.35% | - 2bps | ^ +14bps |
| Dallas-Fort Worth | 5.55% to 6.05% | ^ +6bps | ^ +24bps |
| Houston | 5.95% to 6.50% | ^ +8bps | ^ +28bps |
| Atlanta | 5.65% to 6.20% | ^ +4bps | ^ +18bps |
| Phoenix | 5.45% to 6.00% | - 0bps | ^ +22bps |
| Miami | 4.90% to 5.40% | v -12bps | v -16bps |
| Boston | 5.05% to 5.55% | v -6bps | v -12bps |
| Seattle | 5.10% to 5.65% | v -4bps | - +2bps |
| San Francisco | 5.20% to 5.75% | v -8bps | v -10bps |
| Washington DC | 5.25% to 5.75% | - -2bps | v -8bps |
| Denver | 5.45% to 5.95% | - +2bps | ^ +14bps |
| Tampa | 5.55% to 6.10% | ^ +4bps | ^ +20bps |
| Charlotte | 5.50% to 6.05% | ^ +6bps | ^ +18bps |
| Orlando | 5.60% to 6.15% | ^ +8bps | ^ +22bps |
| Nashville | 5.40% to 5.90% | - +2bps | ^ +12bps |
| Austin | 5.50% to 6.10% | ^ +10bps | ^ +32bps |
| Raleigh-Durham | 5.45% to 5.95% | - 0bps | ^ +14bps |
| San Diego | 4.95% to 5.50% | v -6bps | v -10bps |
| Minneapolis | 5.85% to 6.40% | - +2bps | ^ +10bps |
| Detroit | 6.50% to 7.10% | ^ +6bps | ^ +14bps |
| Las Vegas | 5.65% to 6.20% | - +2bps | ^ +18bps |
| Salt Lake City | 5.55% to 6.05% | - 0bps | ^ +10bps |
| Kansas City | 6.20% to 6.75% | ^ +4bps | ^ +12bps |
| MSA | Going-In Range | QoQ | YoY |
|---|---|---|---|
| New York / NJ | 4.85% to 5.35% | v -10bps | v -18bps |
| Los Angeles / IE | 4.95% to 5.50% | v -14bps | v -22bps |
| Chicago | 5.50% to 6.10% | v -6bps | - +4bps |
| Dallas-Fort Worth | 5.45% to 6.00% | v -8bps | - +2bps |
| Houston | 5.85% to 6.40% | - 0bps | ^ +14bps |
| Atlanta | 5.55% to 6.10% | v -4bps | ^ +8bps |
| Phoenix | 5.40% to 5.95% | v -10bps | ^ +6bps |
| Miami | 5.10% to 5.60% | v -8bps | v -8bps |
| Boston | 5.35% to 5.85% | v -6bps | v -4bps |
| Seattle | 5.20% to 5.70% | v -6bps | - +2bps |
| San Francisco | 5.05% to 5.55% | v -8bps | v -6bps |
| Washington DC | 5.65% to 6.15% | - -2bps | ^ +8bps |
| Denver | 5.85% to 6.35% | - +2bps | ^ +12bps |
| Tampa | 5.95% to 6.45% | - +4bps | ^ +16bps |
| Charlotte | 5.70% to 6.20% | - 0bps | ^ +10bps |
| Orlando | 5.85% to 6.35% | - +2bps | ^ +12bps |
| Nashville | 5.65% to 6.15% | - 0bps | ^ +8bps |
| Austin | 5.80% to 6.30% | ^ +6bps | ^ +18bps |
| Raleigh-Durham | 5.75% to 6.25% | - +2bps | ^ +10bps |
| San Diego | 5.10% to 5.60% | v -8bps | v -6bps |
| Minneapolis | 6.10% to 6.65% | - 0bps | ^ +6bps |
| Detroit | 6.45% to 7.00% | - +2bps | ^ +8bps |
| Las Vegas | 5.95% to 6.50% | - +2bps | ^ +14bps |
| Salt Lake City | 5.85% to 6.35% | - 0bps | ^ +8bps |
| Kansas City | 6.40% to 6.95% | - +4bps | ^ +10bps |
| MSA | Going-In Range | QoQ | YoY |
|---|---|---|---|
| New York | 7.50% to 8.25% | ^ +12bps | ^ +35bps |
| Los Angeles | 7.25% to 8.00% | ^ +14bps | ^ +42bps |
| Chicago | 8.50% to 9.25% | ^ +18bps | ^ +55bps |
| Dallas-Fort Worth | 7.75% to 8.50% | ^ +10bps | ^ +32bps |
| Houston | 8.25% to 9.00% | ^ +14bps | ^ +38bps |
| Atlanta | 7.85% to 8.60% | ^ +12bps | ^ +30bps |
| Phoenix | 7.95% to 8.70% | ^ +10bps | ^ +28bps |
| Miami | 6.85% to 7.55% | - +4bps | ^ +14bps |
| Boston | 7.45% to 8.20% | ^ +10bps | ^ +25bps |
| Seattle | 7.95% to 8.65% | ^ +14bps | ^ +40bps |
| San Francisco | 8.50% to 9.50% | ^ +20bps | ^ +65bps |
| Washington DC | 8.10% to 8.85% | ^ +16bps | ^ +45bps |
| Denver | 8.00% to 8.75% | ^ +12bps | ^ +32bps |
| Tampa | 7.65% to 8.40% | ^ +8bps | ^ +22bps |
| Charlotte | 7.55% to 8.30% | ^ +6bps | ^ +20bps |
| Orlando | 7.75% to 8.50% | ^ +8bps | ^ +24bps |
| Nashville | 7.50% to 8.25% | ^ +6bps | ^ +18bps |
| Austin | 7.85% to 8.65% | ^ +14bps | ^ +38bps |
| Raleigh-Durham | 7.60% to 8.35% | ^ +6bps | ^ +18bps |
| San Diego | 7.45% to 8.20% | ^ +10bps | ^ +28bps |
| Minneapolis | 8.45% to 9.20% | ^ +14bps | ^ +35bps |
| Detroit | 9.25% to 10.50% | ^ +20bps | ^ +60bps |
| Las Vegas | 8.10% to 8.85% | ^ +10bps | ^ +30bps |
| Salt Lake City | 7.85% to 8.60% | ^ +8bps | ^ +22bps |
| Kansas City | 8.65% to 9.40% | ^ +12bps | ^ +30bps |
| MSA | Going-In Range | QoQ | YoY |
|---|---|---|---|
| New York | 5.95% to 6.65% | v -8bps | v -14bps |
| Los Angeles | 5.75% to 6.45% | v -10bps | v -16bps |
| Chicago | 6.85% to 7.50% | - 0bps | - +4bps |
| Dallas-Fort Worth | 6.45% to 7.10% | v -4bps | - +2bps |
| Houston | 6.85% to 7.50% | - 0bps | ^ +8bps |
| Atlanta | 6.55% to 7.20% | v -6bps | - 0bps |
| Phoenix | 6.35% to 7.00% | v -8bps | v -4bps |
| Miami | 5.65% to 6.25% | v -10bps | v -14bps |
| Boston | 6.15% to 6.80% | v -4bps | v -8bps |
| Seattle | 6.05% to 6.70% | v -4bps | - +2bps |
| San Francisco | 6.10% to 6.80% | - 0bps | - +4bps |
| Washington DC | 6.40% to 7.05% | v -2bps | - +2bps |
| Denver | 6.45% to 7.10% | - 0bps | - +4bps |
| Tampa | 6.30% to 6.95% | v -6bps | v -4bps |
| Charlotte | 6.40% to 7.05% | v -4bps | - 0bps |
| Orlando | 6.35% to 7.00% | v -6bps | v -4bps |
| Nashville | 6.25% to 6.90% | v -4bps | v -2bps |
| Austin | 6.45% to 7.10% | - 0bps | ^ +8bps |
| Raleigh-Durham | 6.45% to 7.10% | v -2bps | - +2bps |
| San Diego | 5.85% to 6.50% | v -8bps | v -10bps |
| Minneapolis | 6.95% to 7.60% | - 0bps | - +4bps |
| Detroit | 7.50% to 8.20% | - +2bps | ^ +10bps |
| Las Vegas | 6.60% to 7.25% | - 0bps | ^ +8bps |
| Salt Lake City | 6.50% to 7.15% | - 0bps | - +4bps |
| Kansas City | 7.05% to 7.70% | - 0bps | - +6bps |
4. Asset class deep dives
Multifamily
The headline number masks the dispersion. Coastal gateway markets compressed because institutional capital that sat on the sidelines for 18 months has begun deploying again, primarily into stabilized Class B with light value-add. Pension funds and insurance companies were the most active in Q1, displacing the all-cash family office bid that defined 2024.
Sun Belt secondaries tell the opposite story. Austin widened 32 basis points YoY because supply absorption is still negative. Houston and Orlando are absorbing but only because rent concessions are now embedded in face rent calculations. The widening in these markets is real, not a measurement artifact.
The bid-ask spread has narrowed sharply. Sellers who held through 2024 are now transacting because hold-to-maturity assumptions are no longer working with bridge debt rolling over.
Industrial
The bifurcation between large-bay and last-mile is the durable story. Last-mile sub-250k sf in core MSAs is pricing at 4.75 to 5.25 percent. The buyer pool for these assets is institutional and deep. Big-box distribution 500k+ sf is pricing 75 to 100 basis points wider because Amazon's slowdown in net new lease signings has pulled the marginal demand bid out of the market.
The Inland Empire and the New York / New Jersey port markets continue to lead pricing. Indianapolis, Memphis, and Savannah are wider because tenant demand has decelerated and developers oversupplied the Sun Belt corridor.
Office
Office decompression continues but at a slower pace. The base case at the start of 2025 was that Q1 2026 would mark a stabilization point. That has not happened. Suburban Class B in tertiary markets continues to widen with no buyer pool of consequence beyond opportunistic value-add at deep basis discounts.
CBD trophy assets in New York, Boston, and Miami have stabilized. The bid is institutional, the leases are 10+ years to credit tenants, and the basis has reset to the point where the deals work even with conservative leasing assumptions. This is a narrow band of the market — fewer than 20 transactions nationally in Q1 — but it represents a genuine pricing floor.
Retail
Grocery-anchored retail compressed for the third consecutive quarter. Necessity tenancy, low capex burden, and durable cash flow have made this segment the favored asset class for insurance and family office capital. Cap rates in the high 5s for grocery-anchored centers in primary markets are now common.
Power centers continue to decompress. Big-box anchor exposure, structural retail challenges in the apparel and home goods segments, and meaningful capex requirements have kept buyers cautious. Expect continued widening through 2026.
5. The vintage decompression story
The cap rate that matters is not the headline. It is the spread between the cap rate at which an asset was acquired and the cap rate at which it must be sold or refinanced. The 2021 vintage tells this story most clearly.
An institutional multifamily deal acquired in mid-2021 at a 4.0 percent going-in cap rate, with a 5-year hold thesis, is now staring at a 5.85 percent exit cap. On a stabilized $50M asset with $3M of NOI, that is a value reset from $75M down to $51M. Even with NOI growth of 12 to 15 percent over the hold period, the exit value comes in below the basis.
The 2024 vintage is the inverse story. Deals acquired at 5.50 percent caps in early 2024 are stabilizing into a market where caps for that asset class are now 5.85 percent. The thesis still requires NOI growth, but the basis is defensible.
For LPs evaluating sponsor track records, the question is no longer "did they hit the IRR" but "what was the cap rate cycle they bought into and what is the cap rate cycle they are exiting into." Both numbers are now decisive.
6. What this means for LP underwriting in Q2 2026
Three tactical implications:
- Stress-test exit cap to 50 basis points wide of going-in. The 10-year average of 280 basis points spread to Treasuries is a statistically supported reversion target. If the 10Y holds at 4.30, that implies a stabilized MF cap closer to 7.10 percent. Sponsors quoting flat-to-tighter exit caps should be challenged on the basis.
- Verify the refi assumption with a pencil-test against current debt market pricing. Many 2025 sponsor pitches assume a 65 percent LTV refinance into a long-term agency loan. With debt yields at 8 to 9 percent on the table, that assumption breaks for any deal acquired with bridge debt at sub-1.0x DSCR.
- Differentiate by submarket inside the MSA. The Tampa headline cap rate of 5.55 percent does not capture the difference between a Westshore submarket trade and a Brandon submarket trade. The same is true in every MSA we track. Demand a submarket-level comp set.
7. Watch list for Q2 2026
Three markets where we expect cap rates to move materially over the next 90 days:
- Austin multifamily. Continued weakness in absorption combined with the largest delivery pipeline relative to inventory in any major MSA. We expect another 15 to 25 basis points of widening before year-end.
- San Francisco office. The CBD has begun to bifurcate. Trophy assets are stable. Class B and below are still finding pricing. We expect a meaningful repricing event in Q2 as 2025 modifications work through.
- Inland Empire industrial. Tightening continued in Q1 but deliveries are still meaningful. If absorption decelerates, the current 4.95 to 5.50 percent band could widen. Watch the lease-up data.
Cap rate data is a lagging indicator of capital flows but a leading indicator of valuation outcomes. The 155 basis point spread to Treasuries is the number that should anchor every LP underwriting conversation in Q2.