Full Definition
Development spread is the basis point difference between the yield on cost at stabilization and the prevailing market cap rate for comparable stabilized assets. A 150-250 basis point spread is typical for well-executed NNN build-to-suit development projects.
Related Terms
Yield on Cost
For development deals: stabilized NOI divided by total development cost. The development spread vs. market cap rate.
Cap Rate (Capitalization Rate)
The ratio of a property's Net Operating Income to its purchase price, expressed as a percentage. The primary metric for comparing commercial real estate investments.
Build-to-Suit (BTS)
Development model where a developer builds a property specifically designed for a committed tenant under a pre-negotiated lease.