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Cap Rate Calculator

Calculate cap rate from NOI and value, or back into implied property value from a target cap rate. Describe the deal in plain English or fill in the fields.

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Calculate cap rate
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Back into implied value
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Enter NOI and property value to calculate cap rate, or add a target cap rate to back into value.

Formula
Cap Rate = NOI ÷ Property Value × 100
Implied Value = NOI ÷ (Cap Rate ÷ 100)

Station CRM tracks NYC retail closings and ownership changes daily, the market intelligence layer behind every cap rate conversation. See how it works →

What is cap rate in commercial real estate?

Cap rate, capitalization rate, is a property's annual net operating income divided by its current market value, expressed as a percentage. A retail building generating $150,000 in NOI priced at $2,500,000 has a 6.0% cap rate. The formula is simple; the interpretation isn't. In NYC, prime Manhattan retail has traded below 4% because buyers price in long-term appreciation over current yield. Outer-borough neighborhood retail typically runs 5.5 to 7.5%. Cap rate compresses when demand rises or rates fall; it expands when vacancy climbs. It's a snapshot of what the market thinks about risk today, not a guaranteed return over five years. Station CRM tracks cap rate trends across NYC retail corridors as part of its market intelligence feed for commercial brokers.

Cap rate uses NOI, which strips out debt service, depreciation, and taxes, making it useful for comparing properties across different ownership and financing structures. Two buildings with identical cap rates can have very different cash-on-cash returns depending on how they're financed.

The reverse calculation matters too. If you know the NOI and a target cap rate that reflects market conditions, you can back into implied value. That's what the second section of this calculator does, useful when you need to anchor a valuation to market comps rather than the seller's ask.

NYC cap rate benchmarks

These are working ranges based on recent NYC retail transactions. They shift with the rate environment and lease quality.

NYC retail cap rate ranges by corridor

Manhattan prime corridors (Fifth Ave, SoHo, Meatpacking): 3.0 to 4.5%. Buyers pay for the address, not the yield.

Manhattan secondary retail (UWS, UES, LES, East Village): 4.0 to 5.5%. More income-driven buyers; longer hold periods.

Brooklyn and Queens neighborhood retail (Williamsburg, Park Slope, Astoria): 5.0 to 6.5%. Cap rates compress fast in proven corridors.

Outer-borough and secondary markets: 6.0 to 8.0%+. Higher yield but more lease and credit risk.

Worked example

You're underwriting a 2,200 SF ground-floor space in Astoria. The tenant pays $15,000/month. After a 5% vacancy assumption and $28,000 in annual expenses, NOI is roughly $142,000.

Comparable buildings on that Steinway Street stretch trade at 5.5 to 6.0%. At 5.5%, implied value is $2.58M. At 6.0%, it's $2.37M. If the seller wants $2.9M, you're looking at a 4.9% cap, and you'd need a strong rent-upside story to justify it.

Reverse-mode: your buyer's target is 6.25%. With $142,000 NOI, the most they should pay is $2.27M. That's your negotiating anchor.

Cap rate questions

How do I calculate cap rate?
Cap rate = NOI ÷ property value × 100. First calculate net operating income by subtracting vacancy and operating expenses from gross rents. Divide that by the purchase price or current market value. A building with $120,000 NOI priced at $2,000,000 has a 6.0% cap rate. To reverse it, finding implied value from a target cap rate, divide NOI by the cap rate expressed as a decimal: $120,000 ÷ 0.06 = $2,000,000.
Is a higher or lower cap rate better?
Depends on which side of the deal you're on. Sellers want low cap rates, they imply higher prices. Buyers typically want higher cap rates, better current yield. A 7% cap in a declining corridor can be a worse bet than a 4.5% cap in a strong one. What matters is whether the cap rate reflects accurate NOI and real comparable transactions.
Does cap rate include mortgage payments?
No. Cap rate is calculated on NOI, which excludes debt service. That lets you compare properties independent of financing. To factor in debt, use the DSCR calculator alongside this one.
What's the difference between cap rate and cash-on-cash return?
Cap rate ignores financing entirely. Cash-on-cash measures actual cash flow against equity invested. If you bought at a 5.5% cap but financed 70% at 6.5%, the cost of debt exceeds the yield, cash-on-cash will be lower than cap rate. They converge only when there's no mortgage.
Can I use cap rate to value a vacant building?
Cap rate requires NOI, so a fully vacant building doesn't have one. Brokers typically underwrite to a stabilized NOI, what the building would earn once leased at market, and apply a higher cap rate to reflect lease-up risk. Don't apply a sub-5% cap to a stabilized NOI on a vacant asset without accounting for that risk.
How do rising interest rates affect cap rates?
Cap rates and interest rates tend to move together over time. When the 10-year Treasury rises, buyers expect higher returns from real estate, which pushes cap rates up and prices down. The spread between cap rates and Treasuries is a useful check on whether a market is priced aggressively.

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