As reported by LoopNet -According to Commercial Real Estate Direct, Returns from institutional investors’ commercial property holdings increased in Q2 to 4.59%, up from Q1. Meanwhile, cap rates on the holdings dropped to 5.48%. The numbers are based on the NCREIF Index, which tracks more than 5,000 properties. Investment returns were up in all property sectors and all geographic regions. Office was the best-performing sector, registering a 5.93% overall return, while the West led all geographic regions by registering a 5.63% total return. The Q2 cap rate breaks the previous record low and marks the 10th consecutive quarter of cap rates declines.

Some investors I talk to get confused by cap rates and the fact that cap rates move inversely to prices meaning the lower the cap rate the higher the price of the property. A cap rate is simply a rate of return on your property.

Just like the stock market or any financial vehicle, the return on the investment is driven by the supply, the demand, and the security or in the small investors case, the effort associated with the returns. If you are investing in a tenant-in-common that is, say, a shopping mall that has national credit tenants, long term leases, and stable returns, you can expect to get a smaller return on the amount you invest than if you put that same money into an 8 unit multifamily property in Lynn, MA.

Most of the retirement properties we are offering through our national partners are paying between 6% and 7.5% for cap rates. These are the returns you can expect when you have little or no personal involvement in a large, managed, commercial real estate investment. It seems at the present time our offerings are beating the market by about one point. For more information on available commercial real estate investments nation-wide click here.