Metrics to value CRE

[Trent Kloter]

Hello-

I work for a CRE firm that is planning to branch out into other asset classes however I want to understand the different metrics/thresholds used to evaluate these asset classes. I come from a self storage background and we often discuss rent/sf, cap rate, and price per sqft as well as demographic/current supply thresholds. I would think each CRE asset class would use the same metrics such as cap rate/ price per sqft, but I know there are others like price per door/price per pad. etc. Any help would be great.

Multi Family

Retail

Industrial

Office

[Taylor L.]

Multifamily I like to look at price per door, price per square foot, and gross rent multiplier. 

I think the most overrated metric is cap rate. People confuse cap rate with net return, which is not the case. It is just the ratio of price to net earnings, but return is also highly driven by cost of debt and value add potential.