Cushman & Wakefield’s Valuation & Advisory Logistics Practice Group (LPG) periodically surveys investors regarding their decision-making process in selecting overall capitalization rates. The process involves a myriad of factors, but primarily includes analysis of the physical aspects by asset quality (Class A, B or C) and location, assessment of risks associated with current market conditions and tenancies, and a forecast of future trends driven by changing demand indicators.
In Spring 2025, we interviewed representatives from some of the nation’s most prominent institutional buyers and sellers of industrial assets, including Cushman & Wakefield’s Industrial Capital Markets. However, since our Spring 2025 Edition, interest rates have decreased, which corresponds to lower lending and yield requirements. The current Effective Federal Funds Rate (EFFR) is now targeted at between 4.00% and 4.25%, following the first rate cut of the year in September 2025. This rate, and all interest rates, tend to move in the same direction as inflation, however they typically lag because they are also the primary tool used by central banks to manage inflation. When inflation is falling and economic growth is slowing, central banks may lower interest rates to stimulate the economy.
The 10-Year Treasuries are hovering near 4.00% versus in the mid-4.50% range seen in Spring 2025. However, better news is ahead as the Federal Fund rate is anticipated to be cut by the end of the year with another decrease in 2026, pending inflationary risk. The Fed has taken another (25 bps) step towards a more accommodative stance despite tensions on both sides of its dual mandate. Their latest Summary of Economic Projections points to another 50 bps of cuts anticipated through the end of this year with another 25 bps in cuts expected for 2026, thereby bringing target policy rates to a range of 3.25%-3.5% by the end of 2026.
