# What Is a Cap Rate? Capitalization Rate FAQ for 2026

> Cap rate definition, formula, and why CBRE expects 5–15 bps of compression in 2026. The capitalization rate is a property's annual net operating income (NOI) divided by its value or purchase price, expressed as a percentage.

- Section: Guides
- Author: Uassist.ME Editorial Team
- Publisher: Published by Uassist.ME (https://uassistme.com)
- Published: 2026-10-17
- Last updated: 2026-10-18
- Canonical: https://leasingsignal.com/data-hub/what-is-a-cap-rate-faq/

## Key takeaways

- Cap rate = net operating income ÷ property value.
- Lower cap rates mean higher prices relative to income.
- CBRE expects most property-type cap rates to compress 5–15 bps in 2026.

## What is a cap rate?

The capitalization rate is a property's annual net operating income (NOI) divided by its value or purchase price, expressed as a percentage.

## How do interest rates affect cap rates?

Higher borrowing costs typically push cap rates up (values down); falling rates and abundant capital tend to compress them.

## What is the 2026 cap rate outlook?

CBRE expects cap rates for most property types to compress by 5 to 15 basis points in 2026.

## Frequently asked questions

### What is a cap rate?

The capitalization rate is a property's annual net operating income (NOI) divided by its value or purchase price, expressed as a percentage.

### How do interest rates affect cap rates?

Higher borrowing costs typically push cap rates up (values down); falling rates and abundant capital tend to compress them.

### Will cap rates fall in 2026?

CBRE expects cap rates for most property types to compress by 5 to 15 basis points in 2026.

### Where do these figures come from?

Every figure is attributed in the text and linked in the numbered Sources list (1 source, with publication dates where available). Vendor figures are labeled vendor-reported.

## Sources

1. [CBRE Outlook 2026](https://www.cbre.com/insights/books/us-real-estate-market-outlook-2026) (2026-01-14)