Private Real Estate Valuations Lag Behind Market Reality

Private real estate cap rates have barely moved since 2021, even as Treasury yields rose, widening concerns over future valuation resets.

June 5, 2026

Valerija I.

Private real estate cap rates have stalled near 2021 levels, failing to reflect higher market yields since then.
The spread between appraisal cap rates and US 10-year Treasury yields averaged just 26 basis points across the last 14 quarters.
This disconnect raises concerns for private valuations, while REITs may stand to outperform as appraisal marks eventually catch up to market reality.

Key Takeaways

Private Cap Rates Show Little Movement

Private real estate appraisal cap rates, based on NCREIF ODCE fund data, have barely budged since the end of 2021. Despite rising interest rates and market volatility, appraisers and portfolio managers have largely kept valuations static, diverging sharply from the more responsive REIT market. For the past three years, appraisal cap rates have hovered at levels that matched year-end 2021 REIT implied cap rates, according to Nareit commentary published June 3, 2026.

Persistent Spread Compression Defies History

Historically, the spread between private appraisal cap rates and the US 10-year Treasury yield has averaged 219 basis points since 2000. That spread shrank below 50 basis points only 14 times during this period—twice during the global financial crisis, and 12 times over the last 14 quarters amid today’s valuation dislocation. Over this most recent period, the spread averaged just 26 basis points, as interest rates climbed and appraisals failed to reprice. By comparison, REIT implied cap rate spreads averaged 171 basis points, while Moody’s seasoned Aaa corporate bonds averaged 94 basis points above Treasuries.

Line chart comparing Nareit REIT implied cap rates, NCREIF ODCE appraisal cap rates, and the U.S. 10-year Treasury yield from 2000 through Q1 2026. REIT implied cap rates adjusted higher following rising interest rates, while private appraisal cap rates remained relatively flat near 4%–4.5% since 2021. Treasury yields rose sharply from 2022 through 2024, narrowing the gap between private real estate cap rates and risk-free yields.

Prolonged Divergence Signals Market Adjustment Ahead

This stubborn disconnect highlights the challenges in private market valuation practices during a rising rate environment. For most of 2024 and through Q1 2026, appraised values have not adjusted to the higher cost of capital. Notably, recent US 10-year yields have exceeded NCREIF ODCE appraisal cap rates, an unusual and unsustainable dynamic. For institutional investors and managers, the message is clear. Current private valuations may soon need to align with broader market conditions as mark-to-market adjustments begin to materialize.

Why This Trend Matters for Investors

The persistence of modest spreads in private real estate cap rates creates risk for asset owners, as future valuation write-downs become increasingly likely. REITs, whose cap rates have reset more quickly, could benefit by comparison. According to Nareit, REITs are positioned for relative outperformance as private appraisals are forced to adjust. Investors should monitor ongoing cap rate movements alongside Treasury yields as a barometer for looming valuation changes in private portfolios.

Line chart tracking the spread between NCREIF ODCE appraisal cap rates and the U.S. 10-year Treasury yield from 2000 through Q1 2026. The historical average spread is approximately 2.2 percentage points, but the spread fell close to zero beginning in 2022 and remained near historic lows through Q1 2026, highlighting the disconnect between private real estate valuations and broader capital market conditions.

What’s Next for Private Appraised Valuations

US Treasury yields continued to exceed private appraisal cap rates in early 2026, creating pressure for valuations to realign. The eventual convergence could occur through higher cap rates, lower asset values, or both. Pressure will remain on appraisal practices and portfolio managers to address the valuation lag. If rates stay elevated, market observers anticipate increased write-downs and more realistic spread normalization over the next several quarters.