Cap rates are the universal language of commercial real estate investing. They tell you, in a single number, what return the market is pricing into a property based on its income. But that number means nothing without context.
In Yolo County, cap rates vary significantly depending on property type, tenant quality, lease structure, location, and building condition. This overview breaks down where the market stands heading into the middle of 2026, with enough detail to actually help you make decisions.
How Cap Rates Work: A Quick Refresher
Cap rate equals net operating income divided by purchase price.
A property generating $100,000 in NOI at a $1,500,000 purchase price has a 6.67% cap rate.
Higher cap rates mean higher yield relative to price, but also typically higher risk. Lower cap rates mean lower yield but greater perceived stability.
In any market, cap rates are set by the collective judgment of buyers and sellers about risk and return. They reflect interest rates, tenant credit quality, lease term, market growth, and property condition all compressed into one percentage.
Retail Cap Rates in Yolo County
Retail is the most diverse category, and cap rates reflect that diversity.
NNN Retail with National Credit Tenants (10+ years remaining): 5.5% to 6.5%
These are the pharmacy, fast food, and dollar store deals where a publicly traded company guarantees the lease. In Yolo County, these trade at a slight premium to Sacramento because the market is smaller and less liquid. But the tenant credit is identical, which means the yield advantage is real.
NNN Retail with Regional/Local Tenants (5 to 10 years remaining): 6.5% to 8%
Strong local operators with good financials. The risk premium reflects the lack of a corporate guarantee and the smaller scale of the business. These deals can offer excellent returns if you underwrite the tenant properly.
Multi Tenant Retail Centers: 7% to 9%
Strip centers and small retail centers with a mix of tenants. Cap rates here depend heavily on occupancy, lease term, and location. A fully occupied center on Main Street Woodland with staggered lease expirations might trade at 7%. A center with 20% vacancy on a secondary road could push 9% or higher.
Value Add Retail (below market rents or vacancy): 8% to 10%+ on current income
These are repositioning plays. The current cap rate looks high because the income is depressed. The opportunity is bringing rents to market and filling vacancy. These deals require active management and carry more risk.
Office Cap Rates in Yolo County
Office has been the most scrutinized property type since 2020, and for good reason. Remote work changed the demand equation. But the impact varies by submarket and tenant type.
Professional Office (Stabilized, Downtown Woodland): 7.5% to 9%
Professional services tenants like attorneys, accountants, insurance agents, and financial advisors still need physical office space. They meet clients face to face. Their lease terms tend to be 3 to 5 years, which creates more turnover risk than retail NNN. Cap rates reflect that.
Medical Office: 6.5% to 8%
Medical tenants are among the stickiest in commercial real estate. Dental offices, clinics, and specialty practices invest heavily in buildout and rarely move. Cap rates for medical office are typically 50 to 100 basis points lower than general office because of this stability.
Davis Office: 7% to 8.5%
Davis commands slightly better pricing than Woodland due to the university driven demand base and structural supply constraints. Vacancy is consistently low, which gives landlords confidence in filling vacancies quickly.
Suburban/Flex Office: 8% to 10%
Older office product in secondary locations. These properties face the most headwinds from changing work patterns. Cap rates need to compensate for the risk that tenant demand may not return to pre 2020 levels.
Industrial and Warehouse Cap Rates
Industrial is the strongest performing sector in Yolo County, driven by logistics demand and limited supply.
Modern Warehouse (Built after 2000, 24+ foot clearance): 6% to 7%
Premium product. Modern construction, high ceilings, adequate loading, and good power. These assets are in high demand and limited supply.
Older Warehouse (Built before 1990, 14 to 20 foot clearance): 7% to 8.5%
Functional but dated. Lower ceiling heights limit some modern logistics uses. These properties still lease well because of supply constraints, but they require more maintenance capital and face functional obsolescence risk.
Flex Industrial/Light Manufacturing: 7.5% to 9%
Smaller spaces (5,000 to 15,000 SF) with a mix of office and warehouse. Popular with contractors, small manufacturers, and service businesses. Cap rates vary based on tenant mix and lease quality.
Industrial Land (Improved, Ready for Development): N/A (priced per square foot or per acre)
Industrial land in Yolo County is scarce and trades based on development potential rather than income. Prices have increased significantly as available sites diminish.
Multifamily Cap Rates
Multifamily remains the tightest cap rate category, reflecting strong investor demand for housing assets.
Stabilized Multifamily (20+ units): 5% to 6%
Larger apartment complexes with professional management. Stabilized multifamily properties in West Sacramento and Woodland trade in this range when fully occupied with market rents.
Small Multifamily (4 to 19 units): 5.5% to 7%
Smaller properties that may have deferred maintenance or below market rents. Cap rates vary widely based on condition and rent potential. Value add multifamily in this range can offer strong returns.
New Construction Multifamily: 4.5% to 5.5%
Recent deliveries command premium pricing. Investors accept lower going in cap rates for newer buildings with longer useful life and lower near term capital expenditure requirements.
What's Driving Cap Rates in 2026
Several factors are shaping Yolo County cap rates this year:
Interest Rates: Borrowing costs remain elevated compared to the ultra low rates of 2020 to 2022. Higher financing costs put upward pressure on cap rates because buyers need properties to pencil with current debt terms. This effect has been most pronounced in office and value add retail.
Supply Constraints: Yolo County has limited new commercial construction. Unlike Sacramento, which has seen significant industrial and multifamily deliveries, Yolo County's supply is constrained by geography, zoning, and development timelines. Limited supply supports pricing.
Population Growth: Spring Lake and other residential developments are expanding the Woodland population base. More residents mean more commercial demand, which supports occupancy and rent growth. This growth factor is putting downward pressure on retail and medical office cap rates in growing areas.
Institutional Discovery: As more institutional capital discovers Yolo County (particularly from Sacramento based investors), increased buyer competition puts downward pressure on cap rates. This effect is most visible in industrial and NNN retail.
Tenant Quality: The post pandemic shakeout has left surviving tenants generally stronger. Businesses that made it through 2020 to 2023 have proven resilience. This is reflected in slightly tighter cap rates across tenant types.
Using Cap Rates in Your Analysis
Cap rates are a starting point, not a conclusion. Here's how I use them with clients:
1. **Compare within property types:** A 7% cap rate on an office building means something different than a 7% cap rate on a warehouse. Always compare apples to apples.
2. **Adjust for lease term:** A 6% cap rate with 12 years of NNN lease remaining is a different risk than 6% with 3 years remaining. Factor in turnover risk and leasing costs.
3. **Look at replacement cost:** If it costs $250/SF to build new warehouse space and you can buy existing product at $150/SF, the cap rate is only part of the value proposition.
4. **Consider your financing:** The spread between your cap rate and your borrowing cost determines your leveraged return. A 7% cap rate with 6.5% debt is very different from a 7% cap rate with 5% debt.
5. **Underwrite conservatively:** I always recommend running scenarios at current income, projected income, and a downside case. If the deal works in the downside scenario, you can feel good about it.
Let's Talk Numbers
If you're evaluating a commercial property in Yolo County and want to gut check your cap rate assumptions, I'm happy to help. I track transaction data and lease comps across every submarket and property type in the county.
This is what I do every day. Let's make sure your numbers are right.
This article is for informational purposes only. It is not legal, tax, or investment advice. Cap rates and market data reflect estimates and observations, not guaranteed figures. Consult with qualified professionals before making any investment decision.
Tim Schimmel
Caceres Real Estate
(530) 383 3030