<p>Capitalization rate is a crucial indicator in real estate valuation. This study proposes a novel method for estimating REIT market-implied capitalization rates using financial market information at high frequency and granularity to understand real-time perceptions of property values across various segments, reconciling timely financial market information with traditional appraisal data to capture market dynamics in its complexity. By linking REIT enterprise values to the market-implied values of their underlying properties, this paper introduces a segment-level market-implied capitalization rate which we call “property ICR” based on detailed underlying property attribute segmentation, applicable to real estate investment practice. Through state-space representation, a dynamic model of property ICR for Japanese REITs is estimated in nine segments based on property types, locations, and other attributes. The estimation results using data from 2007 to 2024 suggest that the property ICRs reflect major shocks in social and economic conditions, such as large-scale monetary easing policies after the Global Financial Crisis and the COVID-19 pandemic, distinctly for each segment. Furthermore, comparisons with appraisal valuations reveal that investors may accept cap rates lower than appraisal values for high-quality office buildings in central Tokyo and demand higher ones for suburban retail properties.</p>