by Calculated Risk on 8/11/2009 12:41:00 PM

From CB Richard Ellis: U.S. Retail Cap Rates

Average US retail capitalization rates increased 55 basis points in the 2nd quarter of 2009 to 8.12% ...

As some owners were unable to hold on, cap rates continued the upward march in the 2nd quarter. The 55 basis point gain is the largest quarterly increase we have ever measured, even trumping 2008 Q4. ... Our preliminary review of closed sales and escrows in the 3rd quarter indicate cap rates are continuing to rise.

Click on graph for larger image in new window.

This graph from CBRE shows the retail cap rate since 2003. Note that 2009 was based on just Q1 and Q2, and Q2 is already at 8.12% - and CBRE sees an additional cap rate increase in the early Q3 data.

From Reuters in July, see: Strip Mall Vacancy Rate Hits 10%, Highest Since 1992

During the second quarter, the vacancy rate at U.S. strip malls reached 10 percent, the highest level since 1992, [Reis] said. ... asking rent fell 1.7 percent from a year ago to $19.28 per square foot. Asking rent fell 0.7 percent from the prior quarter. It was the largest single-quarter decline since Reis began tracking quarterly figures in 1999.

Sharply lower rents, higher vacancy rates, reduced leverage and much higher cap rates - Brian calls this the "neutron bomb for RE equity"; destroys CRE investors, but leaves the buildings still standing.