Why It Matters to Sellers
A small cap rate difference can move value by hundreds of thousands of dollars. That is why the right comparable set matters. A Santa Monica building, a Palms building, and a West LA building may trade differently even with similar income.
Buyer Underwriting Impact
Buyers use cap rate to price income and risk. They may accept a lower cap rate for a stronger location or cleaner building, and demand a higher cap rate for deferred maintenance, uncertain expenses, or limited rent growth.