The term "capitalization rate" is primarily used in:

The capitalization rate, often referred to as the "cap rate," is a crucial metric in the evaluation of commercial real estate investments. It represents the rate of return on an investment property based on the income that the property is expected to generate. The cap rate is calculated by dividing the property’s net operating income (NOI) by its purchase price or current market value.

In commercial real estate, this rate helps investors assess the potential profitability of a property, allowing them to compare different investment opportunities or determine whether a property is priced appropriately based on its income-producing ability. This concept is less relevant in residential leases, mortgage lending, or property insurance, where the focus is on different aspects of real estate or financial transactions.

Thus, the application of the capitalization rate is primarily associated with commercial real estate evaluation, making it the correct choice. Understanding how cap rates function is essential for anyone involved in buying, selling, or managing commercial properties, as it directly informs investment decisions and property valuations.