The Best Ever CRE Show JF 3972: Cap Rates, Market Opportunities, and the $120B Shift That Could Change Everything with John Chang
Jul 20, 2025
John Chang, head of research at Marcus and Millichap and a veteran real estate investor since 2007, dives into a transformative proposal that could let U.S. retirement funds invest in private markets, especially commercial real estate. He reveals how this shift could dramatically reshape cap rates, challenging the belief that they closely follow interest rates. Instead, Chang emphasizes the importance of capital flows and investor demand on market dynamics, urging listeners to prepare for a potential wave of capital that could significantly impact property values.
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Capital Flows Influence Cap Rates
- Cap rates are more influenced by capital flow than by interest rates directly.
- Increased transactions correlate with lower cap rates, reduced transactions with higher cap rates.
Cap Rates Don't Track Interest Rates
- Cap rates and interest rates do not consistently move together and can move oppositely.
- The spread between cap rates and interest rates varies widely, defying the usual assumption they correlate tightly.
Don't Wait for Interest Rate Drops
- Don't wait to sell your property based on interest rate drops assuming cap rates will fall.
- Expecting cap rates to drop with interest rates is a fallacy based on a mistaken cause-effect assumption.