In terms of exit cap rates, which asset class typically follows office?

The correct response is that retail typically follows office in terms of exit cap rates. This relationship is observed due to the economic cycle and how different real estate asset classes respond to market conditions.

The reasoning behind this is that both office and retail properties are heavily influenced by the same macroeconomic factors, such as employment rates, consumer spending, and changes in urban development. When the economy is healthy and businesses flourish, office properties tend to perform well, which also benefits the retail market as businesses generate more sales, driving demand for retail spaces. Therefore, as office properties experience changes in their exit cap rates, retail often mirrors those trends due to their interconnected nature within the economy.

While logistics and data centers are gaining traction in the real estate market, they typically have different dynamics and drivers compared to office and retail. Logistics often responds differently to consumer demand, while data centers focus on technology and cloud services, becoming less comparable. Alternatives also present a variety of asset classes but do not follow the same trends as office and retail do. This pattern of following indicates a correlation in how retail outlooks and valuations are influenced after observing movements in the office market.