Real estate income yields (cap rates) have a relationship over time to Baa Corporate Bond yields.
They are both credit sensitive and credit worthy. The average historic cap rate/bond ratio is 108%.
When this measurement is higher by more than one standard deviation, real estate is considered “undervalued,” and when this measurement is lower by more than one standard deviation, real estate is considered “overvalued.” The current ratio, 116%, indicates that real estate is attractively priced. This ratio decreased slightly from 119% the previous quarter, and has now declined for the past two quarters.
Source : CBRE Global Investors