The implication: cap rates must rise.

Today’s 10-year T-bill rate is about the same as in the late 1980s and the early 1990s and cap rates then were typically about 200 BP or more above Treasuries. If current 10-year Treasuries stay in the 4s or 5s, average cap rates could rise to 6 or higher, particularly if there is a gain in the risk premium for office buildings. Residential cap rates may stay lower, but look for retail cap rates to rise as the net continues to steal says from brick-and-mortar.