Definition:
Cap rates are calculated
by Reis based on conditions in each metro and are
updated quarterly. Cap rates are modeled as a function
of risk-free interest rates, metro level in-place rent growth
expectations, current construction activity, and by running
measures of volatility in rents and metro level economic
and demographic factors. Together, these measures are
proxies for capital conditions, income expectations, and
risk. The model was developed using data from actual
transactions.