Cap Rate Calculator
Compute cap rate (Net Operating Income / Property Value) for commercial real estate. Forward + reverse modes. Includes vacancy + expense breakdowns.
Cap Rate Calculator
📊 Income + expenses
🏢 Property value or target rate
How to use the Cap Rate Calculator
Pick the mode
"Compute cap rate": you have a property's asking price + financials and want to know the cap rate to compare against benchmarks. "Compute max value": you have a target cap rate (e.g., 7% for your investment criteria) and want to know the maximum you should pay given the property's NOI. Both modes use the same core formula — just rearranged.
Get the income + expenses right
Cap rate is only as good as the NOI calculation. Gross rental income: what the property would collect at 100% occupancy at market rents (not below-market historical rents). Vacancy: industry standard is 5-7% for healthy markets; 10-15% for declining markets. Operating expenses: property taxes, insurance, property management (8-10% of rent), repairs + maintenance (5-10% of rent), HOA / strata fees, utilities (if landlord-paid). Do NOT include mortgage interest — cap rate is unlevered.
Compare against asset-class benchmarks
Cap rates vary dramatically by asset class + location. Use the benchmarks in the advisory below the results to know if your property's cap rate is fair / cheap / expensive. Trophy / prime: 3-5% (compensation is appreciation, not yield). Class A standard: 5-6%. Class B value-add: 6-8%. Class C / secondary: 8-10%+. A 9% cap rate in Class A office (NYC, Singapore Prime) signals risk; the same 9% in Class C office (suburban tier-3) is normal.
Use cap rate for screening, not decision-making
Cap rate is a first-screen metric — useful for quickly comparing 20 properties to find the 3-5 worth deeper analysis. Final decisions require: financing math (which determines cash-on-cash return), tenant quality + lease structure, capex needs, market trajectory, and your specific tax situation. Cap rate doesn't capture any of these. Use this tool to filter; use a full pro forma DCF analysis to commit.
Cap rate — the universal language of commercial real estate
Cap rate (capitalization rate) is to commercial real estate what P/E ratio is to public equities — a quick comparative metric that lets you screen many properties on a common scale. The math: Cap Rate = NOI ÷ Property Value. NOI (Net Operating Income) is rental income minus all operating expenses except mortgage interest and depreciation. Cap rate is intentionally unlevered — it ignores how the property is financed, letting you compare it across buyers with different capital structures. A 6% cap rate property is the same 6% cap rate whether bought cash or with 80% leverage. The financing question is separate, captured by cash-on-cash return (see our Cash-on-Cash Return Calculator).
Why cap rates vary so widely across asset classes
Cap rate is fundamentally a yield premium over risk-free rates plus compensation for the property's specific risks. Higher cap rate = higher risk OR higher reward. Trophy assets in tier-1 cities (Manhattan office, London Mayfair retail, Singapore CBD office) trade at 3-5% cap rates because: (1) Capital appreciation is the primary return source, not income yield. (2) These properties have institutional buyer pools willing to accept low current yield for stable long-term appreciation. (3) Liquidity is high — easy to sell quickly. At the other end, distressed Class C properties in tier-3 markets trade at 9-12%+ cap rates because: (1) High vacancy risk, deferred maintenance, less stable tenants. (2) Less institutional demand, smaller buyer pool. (3) Lower liquidity — can take months or years to sell. The cap rate spread between Class A and Class C in the same metro often exceeds 400 basis points.
Cap rate is a yield premium over risk-free rates. Higher cap = higher risk + lower price. Lower cap = lower risk + higher price. The market sorts properties by risk-adjusted yield.
The cap rate vs interest rate relationship
Cap rates have a strong but not perfect correlation with prevailing interest rates. When the 10-year US Treasury yield rises, cap rates tend to rise too — because investors demand a "spread" over risk-free rates. The typical spread varies by asset class: Class A multifamily commands 100-200 basis points over the 10-year Treasury; Class B office might be 300-400 basis points; secondary market retail 400-600 bps. 2022-2024 cap rate compression then expansion: as the 10-year yield rose from 1.5% to 4.5%, cap rates have re-rated higher across most asset classes. Investors who bought in 2021 at 4% cap rates for Class A multifamily watched values fall as the same property re-rated to 5-5.5% cap rates by 2024 — a 25-40% value haircut purely from yield curve movement, before any underlying NOI change. The interest rate sensitivity of cap rates is the single biggest factor in CRE returns over multi-year holding periods.
The ASEAN commercial real estate angle
Cap rate dynamics across ASEAN commercial markets have their own profiles. Singapore prime CBD office: 3.0-4.5% cap rates (Marina Bay, Raffles Place) — driven by global institutional capital (US REITs, Singapore REITs, sovereign wealth funds). Singapore industrial: 5.0-6.5% — supported by the JTC and Frasers Logistics REIT pipeline. Kuala Lumpur prime office: 5.5-7.0% cap rates (KLCC, Damansara Heights) — meaningfully higher than Singapore due to ringgit currency premium + lower institutional liquidity. Jakarta CBD office: 7.0-9.0% cap rates (SCBD, Sudirman, Mega Kuningan). Bangkok / Manila / HCMC: 6.5-9.0% across tier-1 prime office. ASEAN retail malls: 6.0-8.0% (CapitaLand Mall, Sun Plaza, Robinson). ASEAN data centres: 5.5-7.5% (driven by hyperscaler demand). Singapore REITs (SREITs) dominate the regional institutional landscape, with CapitaLand Ascendas, Frasers Logistics, Mapletree Industrial all trading at sub-5% cap rates. For retail investors in ASEAN looking at REITs vs direct properties, cap rates provide useful comparison.
10 Things to Know About Cap Rate
Cap Rate = NOI / Property Value. Unlevered yield on a commercial real estate investment. The universal screening metric.
Higher cap rate = higher risk + lower price. Lower cap rate = lower risk + higher price. The market sorts by risk-adjusted yield.
Class A multifamily in primary metros: 4.5-5.5% cap rates. Class C in secondary markets: 8-10%+. The spread captures risk + liquidity.
Cap rate is UNLEVERED — ignores financing. Same 6% cap rate whether bought cash or with 80% leverage. Cash-on-cash captures the financing impact.
Cap rates have a strong correlation with the 10-year Treasury yield (or local equivalent). When rates rise, cap rates rise; property values fall.
From 2022-2024, cap rates expanded 50-150 basis points across most asset classes as US Fed rate hikes pushed yields higher. Many properties lost 20-30%+ value.
The "cap rate spread" over risk-free rates is what investors demand for taking property-specific risk. Typical: 150-400 bps depending on asset class.
Singapore prime CBD office trades at 3.0-4.5% cap rates — among the world's lowest, reflecting global institutional demand + sovereign wealth fund participation.
Jakarta + Manila + HCMC primary office trades at 7-9% cap rates — higher yield reflects currency risk, lower institutional liquidity, less mature markets.
Singapore REITs (SREITs) trading at sub-5% implied cap rates have become a popular retail proxy for direct CRE — easier to buy, more liquid, same exposure.
Frequently Asked Questions
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NOI (Net Operating Income) = Gross Rental Income − Vacancy − Operating Expenses (taxes, insurance, repairs, management, utilities, etc.). It EXCLUDES mortgage interest, depreciation, capex (capital expenditures, replacement reserves), and income taxes. NOI represents the property's pure operating profitability, independent of how it's financed or amortised. Cap rate uses NOI because it lets you compare properties on equal terms — two identical buildings with different mortgages have the same NOI and same cap rate.
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There's no universal "good" — only "appropriate for the asset class + location + your investment criteria." Benchmark ranges (US, 2024): Class A multifamily, prime metro: 4.5-5.5%. Class B/C multifamily: 5.5-8%. Industrial: 5-6.5%. Suburban office: 7-9%. Necessity retail: 6-7.5%. ASEAN (Singapore CBD office 3-4.5%, KL prime 5.5-7%, Jakarta CBD 7-9%). The "right" cap rate depends on what you're buying and what risk you're comfortable taking on.
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Cap rate is UNLEVERED — NOI ÷ property value. Cash-on-cash is LEVERED — annual cash flow (after mortgage) ÷ cash invested. For a $1M property with 6% cap rate, NOI = $60K. With $250K down (25% LTV) and a $7K/mo mortgage payment ($84K/year), annual cash flow = $60K − $84K = -$24K. Cash-on-cash = -$24K / $250K = -9.6%. Same property at 7% cap rate with the same financing would have positive cash flow. Leveraged investors should focus on cash-on-cash; unlevered investors on cap rate. Use both together for full picture.
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Strongly. Cap rates have an empirical correlation with the 10-year Treasury yield (or local equivalent risk-free rate) — typically 100-400 basis points spread depending on asset class. When rates rise, cap rates rise; property values fall. From 2022-2024, the US 10-year went from 1.5% to 4.5%, and cap rates expanded 50-150 bps across asset classes. A property that traded at 4% cap rate in 2021 might trade at 5.5% in 2024 — a 37% value haircut purely from rate movement. This is why interest rate forecasts matter for CRE investors.
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No. High cap rate = high yield BUT also high risk: more vacancy, more tenant concerns, more deferred maintenance, less liquid market, less institutional demand. A 9% cap rate property in tier-3 city might LOOK better than 5% in Manhattan, but the 9% reflects compensation for material risks. Investors targeting high cap rates need to be ready for those risks: tenant turnover, capex surprises, slower appreciation. Lower cap rates trade for higher returns through appreciation and stability. Both can work; just match risk to your tolerance.
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Several sources. CBRE, JLL, Cushman & Wakefield, Knight Frank publish quarterly cap rate reports by metro + asset class. Real Capital Analytics tracks transaction data. For ASEAN: Knight Frank Asia, Colliers Asia, Cushman & Wakefield's APAC research all publish ASEAN-specific reports. For Singapore: URA quarterly market reports + SREITs research from DBS / OCBC / CIMB. For small markets: ask local brokers for "average cap rates in the last 6 months" — they'll have this from their own deal flow. Free public sources are limited; institutional sources are the gold standard.
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Both, but for different purposes. Trailing 12-month (T12) NOI: what the property actually generated last year. The most defensible number for negotiation. Use this for asking-price cap rates. Projected (proforma) NOI: what the property COULD generate after market-rent adjustments + cost optimisations. Sellers always use projected (higher) NOI to support higher asking prices; buyers should always test sensitivity using trailing (lower) NOI. The real intrinsic value is somewhere in between. A common screening rule: trust trailing NOI; reject deals priced off projected NOI assumptions you don't believe.
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Yes — cap rate math works identically for residential as commercial. Single-family rentals and small multifamily (2-4 unit) are commonly analysed via cap rate by retail investors. Caveat: residential rental markets are less institutional, so cap rates tend to be slightly higher (compensating for less liquidity + smaller transaction volumes) and have less "official" comp data. Use neighbourhood comparable sales + rental data from sites like Zillow, Rentometer, PropertyGuru, 99.co for ASEAN markets. For very small portfolios (1-4 units), use the GRM (Gross Rent Multiplier) for quick screening alongside cap rate.
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No. All calculations run entirely in your browser via JavaScript. There's no server roundtrip — open DevTools → Network and confirm zero outbound requests. Your property data stays on your device. Safe for confidential deal analysis, due diligence, or any sensitive commercial real estate data.
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Cap rate doesn't capture appreciation — only current income yield. Total CRE return = cap rate (income) + NOI growth (rental escalations) + cap rate compression (if rates fall). Trophy assets at 4% cap rates may produce TOTAL returns of 8-10% via appreciation + 2-3% NOI growth. Higher-cap properties (9%) may produce TOTAL returns of 9-11% but mostly from income, with less appreciation. For multi-year holding periods, total return matters more than cap rate alone. Cap rate is the income floor; appreciation is the upside.
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