CBRE's survey of institutional buyers and sellers found all-property cap rates held broadly steady through the back half of 2025, even as Treasury yields moved. Transaction volume didn't stall waiting for cap rates to compress further, it rose roughly 19% over the period. The market repriced to a stable cap rate and moved on. It's debt service, not cap rate, that's doing the work on sizing now.
A flat cap rate holds asset value roughly flat. It does nothing for the debt constant. At a higher rate, the same NOI supports less loan against the same value, whether the binding test is DSCR or debt yield. A sponsor pricing an acquisition off a cap-rate story that assumes further compression is pricing off a trend that CBRE's own data says stopped.
Underwrite to today's debt constant, not to a cap rate you expect to compress further. Run debt yield and DSCR at the rate actually available now, size proceeds off that, and treat any future cap-rate move as upside rather than a number baked into the ask. That's the difference between a deal that closes at the terms quoted and one that gets re-traded thirty days in.
"Volume rose 19% at a steady cap rate. The market didn't wait for compression, it re-priced to the debt cost that's actually available and transacted anyway."
Treat cap rate as a value input, not a sizing input. The number that actually governs proceeds, LTV, DSCR, debt yield, all run off today's debt cost. A sponsor still modeling further cap-rate compression into their return is modeling a trend CBRE's own H2 2025 data says has stopped.