Inreal estateappraisal theory, the incomeapproachisone of importantmethods, and the keyof the income approach is confirmation ofnetincome and capitalizationrates.
The increased cost of capital will lead to pressure on capitalizationrates as the spreads between the cost of capital and capitalizationrates will be compressing.
One measure of how expensive REITs have become is capitalizationrates, defined as net operating income (profit after operating expenses but before debt service) divided by a property's value.
For instance, instead of using market capitalization as a basis for portfolio positions, some newer ETFs use other financial measures, such as revenue or dividend rates, to weight their holdings.