Property Valuation
In Texas commercial real estate, a 'cap rate expansion' (rising cap rates) typically indicates:
ARising property values
BFalling property values and reduced investor confidence or higher required returns✓ Correct
CIncreasing rental rates
DDecreasing operating expenses
Explanation
Cap rate expansion (rising cap rates) is generally negative for property values—for the same NOI, a higher cap rate produces a lower value. Cap rates tend to rise when interest rates increase, investor sentiment declines, risk premiums increase, or economic uncertainty grows. This is the opposite of cap rate compression.
Related Texas Property Valuation Questions
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- A 'drive-by' or exterior-only appraisal for a Texas property uses FNMA Form:
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