Global Cap Rate Trends and Their Impact on Brazil

For Ribeiro, the central debate is whether the world has entered a “new normal” of structurally higher cap rates. His view is balanced: “We are facing a relevant cyclical adjustment occurring on top of a structural shift in the level of capital costs.”

The cyclical component is visible in the recent stabilization of yields in the U.S. The structural element, however, stems from factors such as higher public debt levels in developed economies—likely keeping long-term yield curves elevated—as well as sectoral changes, particularly in office. In this segment, part of the cap rate expansion reflects a more permanent risk of vacancy and obsolescence.

At first glance, the gap compared with the U.S.—where core assets trade between 5% and 6%—suggests a significant opportunity.

However, Ribeiro emphasizes methodological rigor. “The relevant indicator is the spread over the local risk-free rate.” With the NTN-B 2035 around 7.2% in real terms during the period, an industrial cap rate of 11.7% represents a premium close to 450 basis points. The spread of the IFIX over the NTN-B was in a similar range, above the recent historical average.

“The conclusion is more complex than the headline suggests. Brazil trades at higher nominal cap rates, but the real premium adjusted for domestic risk is not extraordinary. A significant portion of the yield compensates for macroeconomic risk.”

For local investors with liabilities in Brazilian reais, the current premium can be considered consistent, particularly in assets with long leases and proper indexation. For international investors, the equation also includes currency and sovereign risk. “When adjusted for U.S. dollars and hedging costs, the differential relative to developed markets narrows.”

Following the global repricing, a misalignment between sellers and buyers remains, though uneven across segments. In offices, cap rates rose from around 6.5% in 2021 to levels close to 9% in recent transactions. Many owners still anchor expectations in the previous cycle, while buyers have internalized a higher risk-free rate.

In logistics, the balance is greater, with stabilization between 8.5% and 9%. In dominant shopping centers, recent transactions have established clear benchmarks, indicating consensus around prime assets.

The rise in the cost of debt first affected transaction volumes—reducing highly leveraged buyers—and then, more gradually, valuations. The impact has been uneven: offices adjusted more sharply, while logistics and dominant shopping centers showed greater resilience.

This has also changed the prevailing investor profile. “Pure core investors lost relative prominence, and highly leveraged opportunistic investors did as well. Capital positioned between core+ and light value-add gained space, largely funded with equity and focused on NOI growth.”

According to Ribeiro, the current cap rate structure is compatible with the institutional cost of capital for high-quality assets, but it requires discipline in exit assumptions. “Using historical averages that incorporate the period of financial repression can artificially inflate residual value.”

For broad and sustainable cap rate compression to occur in Brazil, the key condition would be a structural decline in long-term real interest rates. “A temporary drop in the Selic rate is not enough. The market needs to believe that long-term NTN-B yields will operate at a structurally lower level.”

Until then, the transmission of the global cost of capital will continue to be filtered through the specific fundamentals of each segment. “Treating the market as a single block is the most common analytical mistake in the current cycle. Opportunities exist, but they are concentrated where there is clarity of fundamentals and consensus on pricing.”