How to Calculate Cap Rate for Commercial Properties in Massachusetts
By Kyle Gibbons, Head of Acquisitions, CommercialGRP
At CommercialGRP, we approach every acquisition with precision, patience, and purpose. Whether we’re evaluating an industrial asset in Worcester or a retail property on Boston’s North Shore, one metric plays a key role in our initial analysis: the capitalization rate—or cap rate.
Understanding how to calculate and interpret cap rate is essential for investors, brokers, and developers alike. But beyond the math, it’s about what the number represents: risk, return, and long-term value.
What Is Cap Rate?
Cap rate is a measure of a property’s potential return based on its current income. It helps us—and our investors—compare opportunities across different asset types and markets.
The basic formula is straightforward:
Cap Rate = Net Operating Income (NOI) ÷ Purchase Price
For example, if a property generates $600,000 in NOI and is priced at $10 million, the cap rate is 6%.
While the math is simple, the interpretation is where expertise matters. A higher cap rate can indicate higher potential returns—but also higher perceived risk. A lower cap rate usually signals stability, stronger credit tenancy, or a prime location.
Motivated & Committed: A Disciplined Sourcing Process
We review hundreds of potential acquisitions each year, but only a fraction make it through our buy-box filter—industrial assets between 15,000 and 120,000 SF, and select retail centers.
That discipline is part of our commitment: to pursue deals that balance attractive returns with meaningful community impact.
We don’t chase cap rates in isolation; we evaluate how each property fits into the market cycle, the local economy, and the surrounding neighborhood’s trajectory.
Outstanding Communicators: Transparency in Every Transaction
Cap rate is just one input among many, but it’s also one of the most commonly misunderstood. That’s why we make it a point to walk our investors through every assumption—rent growth, expense ratios, credit quality—so they can see the full picture.
Our goal is simple: no surprises. Transparency builds confidence, and confidence fuels strong partnerships.
Self-Reliant & Detail-Oriented: Evaluating Beyond the Numbers
In Massachusetts, cap rates can vary dramatically between markets. A light-industrial property in the I-495 corridor may trade at 6.5%, while a retail asset in Greater Boston might command 5%.
We dive deep—analyzing tenant credit, lease rollover schedules, deferred maintenance, and local absorption rates. By building our models in-house, we stay self-reliant and in full control of our assumptions.
Every decimal point matters. Precision isn’t just a preference; it’s a responsibility.
Honesty & Integrity: Fair Acquisitions That Create Lasting Value
Cap rate analysis only has meaning when paired with integrity. At CommercialGRP, we don’t manipulate numbers to make a deal work. If the returns don’t align with our investors’ goals—or the community’s needs—we move on.
That honesty earns trust and keeps our partnerships strong. Every acquisition we complete is meant to create sustainable value—for our investors, our tenants, and the communities where we invest.
Our Core Focus: Beyond the Cap Rate
While the cap rate is a key metric, it’s not our destination—it’s our starting point. Our core focus is transforming communities and improving lives through thoughtful acquisitions.
By combining financial discipline with social impact, we pursue properties that enhance economic vitality and provide stable, long-term growth for our stakeholders.
Let’s Talk Investments That Make a Difference
If you’re an investor looking to partner with a team that values precision, transparency, and long-term value creation, I’d welcome a conversation.
Reach out to our acquisitions team at team@commercialgrp.com or connect with us on LinkedIn to explore current opportunities.
At CommercialGRP, we don’t just calculate returns—we build them, thoughtfully and responsibly.
