Research Outline

IRR: Residential and Commercial Projects

Goals

To determine the typical rates of return generated by various classes of housing projects in the US.

Early Findings

Housing Spaces

  • The average rate of return or cap rate for multi-family housing properties in the US was 5.11 percent for infill housing and 5.37 percent for suburban housing in the second quarter of 2019.
  • Affordable housing properties typically generate an annual return of 6.6 percent for-profit investors who invest in this sort of housing, according to a report by the NREI.

Commercial Spaces

  • The cap rates for retail spaces were 7.47 percent for neighborhoods, 8.54 percent for power, and 4.78 percent for high streets in the second half of 2019, according to a recent report by CBRE.
  • In 2019, hotels located in central business districts (CBD) generated, on average, 7.99 percent return on investment, while those located in the suburbs generated 8.55 percent.
  • The cap rate for industrial buildings was 6.13 percent in the second quarter of 2019.
  • Office spaces located in central business districts (CBD) generated, on average, 6.65 percent return on investment, while those located in the suburbs generated 7.88 percent.