capitalization rate - equity investment

While capitalization rate = r-g, why will it decline in times of inflation, and increase when interest rate increase?

its been a while since i went over that stuff, but i think it goes something like this: Real estate Mkt Value = After Tax cash flow (or NOI?) / Ro, where Ro = r- g, and is the capitalizaiton rate. With inflation, property values go up and assuming that higher prices are still not reflected in the cash flow (or NOI), then your denominator has to decrease, which is the cap rate. When interest rate increases, r increases and hence Ro increases (the spread r-g increases).

The cap may increase during times of inflation due to property values increasing. As property values increase, the NOI could/should also increase. Growth in g would decrease cap. If interest rates increase, the investment becomes riskier and investors require more return which increases cap.