Those are all great questions, erlwang! To start, I would say your first question is really just one question, because risk = return, and cap rates are effectively the return that investors are expecting to receive. Based on that, the higher the cap rate, the higher the return, and the higher the risk.

That being said, here is our perspective at Leveraged Breakdowns, from lowest risk (therefore lowest return and lowest cap rate) to highest in today’s market (parentheses are average cap rates in primary markets for 2Q19 according to NGKF):

1. Industrial (4.7%)
2. Multi-family (4.8%)
3. Office (5.5%)
4. Retail (5.7%)
5. Hospitality (6.6%)

With regards to REPE vs RE Debt, the rule of thumb is that owners always earn more than lenders. Knowing that risk = reward, that does mean that an owner takes more risk. The answer is really a question about your appetite for risk.

Finally, if I were looking for assets in Manhattan today, it all depends on my risk appetite. I invest out of different funds, and those funds are backed by investors with different priorities. If I were targeting core-plus fund returns (~11%), I would allocate more capital toward market-rate newer rental apartment towers, high-credit office buildings, and prime location industrial warehouses. If I were chasing opportunistic returns (~18%), I’d crank the risk dial up by investing in older, value-add buildings or offices with an upcoming major lease roll that I think I can fill.