PT - JOURNAL ARTICLE AU - Eli Beracha AU - David H. Downs AU - Greg MacKinnon TI - Are High-Cap-Rate Properties Better Investments? AID - 10.3905/jpm.2017.43.6.162 DP - 2017 Sep 30 TA - The Journal of Portfolio Management PG - 162--178 VI - 43 IP - 6 4099 - https://pm-research.com/content/43/6/162.short 4100 - https://pm-research.com/content/43/6/162.full AB - 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