TY - JOUR T1 - Are High-Cap-Rate Properties Better Investments? JF - The Journal of Portfolio Management SP - 162 LP - 178 DO - 10.3905/jpm.2017.43.6.162 VL - 43 IS - 6 AU - Eli Beracha AU - David H. Downs AU - Greg MacKinnon Y1 - 2017/09/30 UR - https://pm-research.com/content/43/6/162.abstract N2 - In this article, the authors explore whether properties with higher cap rates have better investment performance than those with low cap rates. Using market-adjusted cap rates to classify individual properties, they find evidence of a strong value effect in real estate: High-cap-rate properties exhibit higher returns, outperform on a risk-adjusted basis, and should be preferred by investors. The value effect is consistent across property types, persistent over the cycle, statistically significant, and very large in economic terms. Although the underlying dynamics vary somewhat across property types (especially apartments), the better performance of high-cap-rate (i.e., value) properties appears nearly ubiquitous.TOPICS: Real estate, performance measurement ER -