Hot take: I thought cap rates were the whole story for a strip mall deal in Phoenix

For years, I just looked at the cap rate on a listing and called it a day. If it was a 7, I was in. Then I lost a bid on a 20,000 square foot retail center last fall because my offer was too low. My broker told me the winning bidder ran a full tenant-by-tenant rent roll analysis and found three national credit tenants with 8-year leases left. That stability meant way more than the headline cap rate. Now I spend a full day digging into every lease, looking at renewal dates, and checking tenant credit before I even think about the price. It changed how I see value completely. Has anyone else gotten burned by just trusting the cap rate number?

2 comments

2 Comments

jamieh769d ago

Phoenix retail is all about land value and future densification. That rent roll analysis is just busywork for people who overcomplicate simple math. A 7 cap on a stable property is a good deal, period.

amymiller9d ago

But @jamieh76, what happens when the water runs out and the land value tanks?