Cap Space, Reframed

Overview

On January 31, 2019, a highly controversial trade was made between the New York Knicks and the Dallas Mavericks. The Knicks had spent years looking for a franchise cornerstone to change the direction of the organization. After many swings and misses, the Knicks appeared to have uncovered such a foundational player in Kristaps Porzingis. Four seasons later, Porzingis’ trade to Dallas appeared downright shocking. In retrospect, it has become clear that there were several factors at play motivating the trade; however, the primary motivation was to help the organization clear its books to position itself as a Max Cap Space team in the following offseason. The goal was to attract high profile Free Agents, specifically Kevin Durant and Kyrie Irving. Anyone familiar with the NBA knows how the story ultimately unfolded. And, while the result of the Knicks’ failed pursuit of these two Star players continues to remain an undercurrent, there are two interesting takeaways from the Knicks’ strategy: the concept of organizations shifting money (in certain circumstances in dramatic ways) to create Cap Space, and its interplay with Free Agents hitting the market who are worth the investment. From today’s vantage point, the league’s strategic environment has shifted. Teams still clear Cap Space; however, the conditions that once made Cap Space a Star-acquisition pathway have changed. These shifts reflect greater trends and structural changes in the league.

This shift, in turn, creates a series of questions about the present and future of Free Agency. Of equal or heightened importance is the concept of Cap Space, and whether building a roster using such space is still a viable option in the modern NBA. This analysis will: examine the Cap Space reality; analyze how organizations have used it over the last several seasons; investigate contractual trends; evaluate if Cap Space is as valuable of an asset as it once was from a team-building perspective; and determine at which point during the team-building process organizations are likely to use Free Agency and Cap Space. Ultimately, this leads to the central question: Is Cap Space still a viable mechanism for acquiring Star talent, or has it become primarily a flexibility and timeline-acceleration tool?

The Background

The balance between Trades and Free Agency has long defined how talent moves in the NBA. And yet, in recent years, that balance has tilted heavily toward Trades with the biggest player transactions involving the league’s biggest names having been via this avenue. Among others, the following Trades stand out: Luka Dončić to the Los Angeles Lakers; Kevin Durant to the Phoenix Suns and then the Houston Rockets; Karl-Anthony Towns to the Knicks; James Harden to the Brooklyn Nets, the Philadelphia 76ers, and the Los Angeles Clippers; and Donovan Mitchell to the Cleveland Cavaliers. That said, as written about in a previous deep dive analysis about the concept of a Star trade, major trades are not a modern phenomenon. League landscape-shifting deals have always been a component of the NBA (and have occurred more often than in any other major American sports league). However, and most importantly, these trades were not the primary component, as league-changing moves were just as common in Free Agency. This is evidenced by: LeBron James to the Miami Heat in 2010, the Cavaliers in 2014, and the Lakers in 2018; Durant to the Golden State Warriors in 2016; Shaquille O’Neal to the Lakers in 1996; Durant and Irving to the Nets in 2019; and Kawhi Leonard to the Clippers during that same offseason.

That said, what has triggered the decreased reliance on Free Agency? There are several reasons underlying this market shift. For starters, Free Agent pools are drying up. This is predominantly because extensions have become the new form of Free Agency. In 2024-25, roughly $4.1B worth of extensions were handed out to players during the offseason. (This number contemplates both veteran extensions and rookie extensions.) Thus far in 2025-26, that sum is approximately $3B, which will likely increase over the coming months. The change in rules regarding the veteran extension in the current CBA (allowing for 140% of the previous season’s salary contrasted with the 120% increase previously allowed under the former CBA) was one of the factors that spurred this transition. Below is a chart depicting the number of veteran extensions signed in each season since 2019-2020, along with the number of Free Agent contracts signed that were for more than the minimum.

As highlighted above, there has been a dramatic downward shift in the number of non-Veteran Minimum contracts signed from 2019-2020 (80) to 2025-26 (38). This has been coupled with an upward shift in the number of veteran extensions signed (from 12 in 2019-2020 to 27 in 2024-25). To date in the 2025-2026 season, 14 have been signed, with players either scheduled to hit Free Agency in 2026-27 or who are holding an option for that season and are able to extend through June 30^th. What this boils down to is that, during this 2025-2026 season, the Extension total will increase.

This, in turn, leads to the second limiting factor: in this current Apron environment, every dollar allocated is vital and must be accounted for. Organizations are increasingly hesitant to rush into the type of Free Agency (with the concurrent willingness to overpay to “get their guy”) that happened in 2016. On the flip side, bigger-named players have been more willing to forego Free Agency, instead opting to extend even at a lower price (e.g. Jalen Brunson, Derrick White, Mikal Bridges, and Kevin Durant). There are several potential motivating factors for this trend, such as: ensuring long-term guaranteed money; helping a player’s respective franchise by creating extra financial wiggle-room vis-à-vis the team Cap situation; a desire to win championships; and/or a general wariness on the part of the player regarding a depreciated market.

The Current Cap Space Reality

When reviewing the current Cap Space reality, one needs to analyze what the Cap Space market has been like from both a player perspective and a team perspective.

Player Perspective

Beginning with the player perspective, due to the rise in the number of extensions handed out per season, the Free Agency talent pool has been deflated. This deflation seems to have rendered the concept of Cap Space less desirable since there is dramatically less available high-end talent on the market. The progression can be boiled down to:

More Extensions → Less Talent Available → Fewer Cap Space Teams → Less Money Available → Smaller Contracts → Fewer Players Leaving Via the Cap Space Route

This is reinforced by research utilizing Spotrac, where, over the last five offseasons, of the 111 contracts that were signed in Free Agency with a total value that exceeded $100M, or with an AAV higher than $10M, only 13 players were signed using Cap Space (with the player subsequently changing teams as well). These 13 players are:

Paul George, Myles Turner, Isaiah Hartenstein, Tobais Harris, Kentavious Caldwell-Pope, Chris Paul, Jalen Brunson, Fred VanVleet, Bruce Brown Jr., DeMar DeRozan, Joe Ingles, Kelly Oubre, and Kelly Olynyk.

During this timeframe, and based upon a review of this list, the highest profile player to change teams via Free Agency Cap Space was Paul George, who received a full 4-year 35% max from the 76ers in the 2024 offseason. In fact, he is arguably the only player listed who was considered a Star at the time of his signing. (While a player such as Jalen Brunson developed into a Star, he was not viewed as one at the time when he signed with the Knicks in 2022). Beyond George, this list, comprising high-level role players and aging veterans, proves that, over the last number of years, when a Star has changed teams, the vehicle has been Trade, not Free Agency, and certainly not via the Cap Space route. This implies that, in certain ways, the value of Cap Space is directly tied to the quality of the Free Agent market, which has been shallow. Additionally, over time, the number of players signed using Cap Space and meeting the contract value criteria listed has decreased, as evidenced by the following:

The final note on the player front has to do with signing exceptions and Bird Rights. As the talent pool in Free Agency has shifted away from high-end players and toward high-impact role players, the strategic value of a team remaining over the Cap might have increased. By staying above the Cap, teams retain Bird Rights on their own players, allowing them to re-sign or extend core contributors without using Cap Space, and/or Sign & Trade them in exchange for assets or the creation of TPEs. Having these options and retaining more control over team-building variables is certainly appealing. Moreover, operating as an over-the-Cap position grants access to the NTMLE. The largest form of Mid-Level is a sizable salary-slot, thereby according a team an important vehicle to acquire impact-role players on the market. Thus, Cap Space shifts from being a Star-acquisition strategy to a question of opportunity cost, balancing flexibility, retention, and long-term roster control.

Team Perspective

Next, looking at the Cap Space market from the team perspective. I first established how many times during the past five seasons organizations have entered the offseason with projected Cap Space. It should be stated that because Cap situations are fluid, a team’s financial standing is also continually in flux. For example, in the 2025-26 season, the Bucks were well over the Cap; however, through a series of transactions, the team was able to maneuver under the Cap to create space to sign Turner. That said, the following list in chart form comprises teams who were projected to have Cap Space heading INTO each successive offseason during the past five seasons:

Not all of these organizations operated as a Cap Space team from both a financial and roster-building perspective. For example, the 2025 Pistons had the ability to create Cap Space and operate under the Cap but chose to operate over it. Even so, in total, twenty-nine organizations have headed into an offseason with the ability to become a Cap Space team, with twenty-five proceeding to operate as such. Within the twenty-five-team cohort and within this time framework, there were sixteen unique teams, certain of which have operated as a Cap Space team more than once. These teams were: the Pistons (4), Spurs (4), Magic (2), Thunder (2) Knicks (2), Pacers (2), and Jazz (2). As illustrated by the chart, over the last two offseasons there has been a decrease in the number of Cap Space teams, with only three projected to go the under-the-Cap route pre-offseason. (As stated earlier, the Pistons ultimately operated over the Cap; however, the Bucks replaced the Pistons as the third Cap Space team). Additionally, just because a team has Cap Space does not mean that it will use it on the market. The Grizzlies, for example, created and used its space to renegotiate (and subsequently extend) Jaren Jackson Jr.’s contract. That said, this decrease over time correlates with a parallel increase in extensions. Additionally, due to a new 2023 CBA rule (which allows prospective Free Agents and their Bird Rights-holding team to begin negotiations the day after the conclusion of the NBA Finals), more agreements are being reached before Free Agency even begins.

To analyze the franchises that use Cap Space, I established a basic rubric comprising what I believe to be the three stages of a team-building process, each of which contains two subsets thereby totaling six different categories. I then grouped the teams accordingly. Assembling a roster, establishing a foundation and core, and building a team capable of competing at the highest level is an incredibly complicated and multi-faceted process. Each organization has its own trajectory and strategic underpinnings. That said, for the sake of this analysis, the basic rubric is as follows:

In creating this rubric, I attempted to capture the main steps that organizations typically traverse when building out a team from bottom (rebuild) to top (contender). Using these stages as a lens, of the twenty-five teams, eleven fit into the Rebuilding Phase stages, eleven into the Transitional Phase stages, and 3 into the Playoff grouping. Examples for each of the stages can be found below:

Stage 1 - Teams at the outset of a rebuild. The focus is on stripping the roster, prioritizing future flexibility, draft capital, and development opportunities to build a foundation.

• Example move for this classification: absorbing undesirable salary attached to draft capital.

• On the ground example: The 2025 Brooklyn Nets, which used its league-leading amount of Cap Space to absorb salary dumps attached to valuable draft capital, while acquiring players who could be flipped for value down the line. This is best illustrated when the team acquired Michael Porter Jr., but also, more importantly, its acquisition of Denver’s 2032 unprotected 1st Round Pick. The team’s underlying strategy was to build out a young core, while simultaneously positioning itself for a high lottery pick in the upcoming draft.

Stage 2 - Teams that have established early building blocks and are now working to refine, evaluate, and reinforce that core. The emphasis is still internal: player development, structure, and identity.

• Example move for this classification: adding a veteran to help mentor the younger rostered players

• On the ground example: The 2024 San Antonio Spurs signing Chris Paul to help, among others, Victor Wembenyama and Stephon Castle with their respective developmental processes, providing them with a steady on-court hand, and an off-court leadership presence.

Stage 3 - Teams that begin to take steps out of a rebuild and are now using resources more intentionally to complement the core.

• Example move for this classification: A team attempting to take a step out of a rebuild by using Cap Space to add pieces that complement its in-house core and raise the overall floor.

• On the ground example: The 2023 Houston Rockets, which signed, among others, Fred VanVleet to complement the team’s in-house core, and to transition out of a rebuild into a more competitive phase.

Stage 4 - Organizations that are competitive but not yet firmly entrenched as year-to-year playoff teams seeking to solidify themselves in the playoff cohort.

• Example move for this classification: A team attempting to cement itself into the playoff conversation by using Cap Space to add pieces that complement its in-house core and raise the overall floor.

• On the ground example: The 2024 Orlando Magic fall into this stage, as demonstrated by its signing of sharp-shooter Kentavious Caldwell-Pope to help improve the team’s spacing and 3pt shooting.

Stage 5 - Teams that are firmly in the playoff mix but not yet in the championship tier, seeking to reinforce the core, or perhaps reshape certain parts of the roster to take the next step.

• Example move for this classification: An already competitive or playoff-level team using its Cap Space to fill roster gaps, add complementary talent, or stand pat to maintain continuity.

• On the ground example: The 2024 Oklahoma City Thunder, which, coming off a disappointing second-round exit as the #1 seed (where the players’ lack of size and lack of frontcourt depth were exposed by the Mavericks), used Cap Space to lure Isaiah Hartenstein away from the Knicks. The Thunder, already a good team with both a high floor and ceiling, used its space to raise both and enter the true inner-circle contender tier.

Stage 6 - Teams that are inner circle title contenders with a foundation, core, and roster capable of challenging for championships.

• Example move for this classification: None (This has not recently occurred.)

• On the ground example: None (This has not recently occurred.)

The breakdown of how many teams fall into each stage and phase within the team-building process makes sense given the larger Free Agency market trends that have developed across the timeframe. In general, when a team pursues a Star, it is an indication that such team is ready to take the next step and try to compete. This would place the team in the latter half of the team-building timeline. Instead, over the last five seasons, most of the teams that have had Cap Space have been in the first three stages (17 of the 25 fell into this range, which is 68%). Thus, it can be argued that Cap Space (and going the Cap Space route) has become a tool for non-competitive teams looking to reset, rebuild, or accelerate their respective timelines. An alternative way to analyze this is through a playoff lens. Of the twenty-five Cap Space teams, eighteen did not make the playoffs in the previous season. And of the seven that had made the playoffs, six were eliminated in the 1st Round, and the seventh was eliminated in the 2nd round.

Takeaways

Harking back to the original questions proposed in the “Overview” section as a lens, what are the takeaways from this analysis?

• The NBA’s Star movement has shifted away from Free Agency and toward the Trade market.

• Extensions have reduced the number of high-end players reaching Free Agency.

• Over the last number of seasons, teams operating with Cap Space are typically in the earlier stages of team-building processes. In these early stages, Cap Space functions as a flexibility and asset-acquisition tool (e.g., taking on contracts for picks, reshaping or accelerating a young core), with Front Offices weaponizing the space.

• For teams further along the timeline, staying over-the-Cap can be more valuable, as it preserves Bird Rights and provides access to the NTMLE. That said, if a team further along in its team-building process has access to Cap Space, that Cap Space has been used as a tool to solidify the foundation, compliment the core, or cement the team in a specific tier.

• The Cap Space route remains viable; however, its value is highly context-dependent and increasingly separated from Star acquisition. It can be argued that the value of Cap Space depends on the quality of the Free Agent market.

• Overall, Cap Space is now less of a Star-pathway and more of a roster-building and timeline-acceleration mechanism, while Star-level upgrades are now more likely to happen via Trade rather than Free Agency.

Conclusion

It is important to note that, regarding building out an entire roster using Cap Space and Free Agency, there has only been one team that fully committed to this option over the last number of years: the 76ers. Ultimately, (to this point) this strategy did not go according to plan. Thus, the jury is still out as to whether Front Offices will resort to structuring Cap Sheets as a viable pathway to completely clear the books and build the roster using said Free Agency and Cap Space. It is clear that the pursuit of Cap Space as a vehicle for team-building is directly tied to the prospective Free Agent markets, which, as stated above, are inherently unpredictable because of extensions and trades. Therefore, banking on building out a roster using a specific future Free Agent class might not be a safe strategy anymore. In short, Cap Space has not disappeared; however, it has changed. It is no longer a reliable Star-acquisition plan, but a timeline and roster-engineering tool, whose value is largely dependent on the strength and depth of the Free Agent market in any given year. Periodically, the odd Star will still likely hit Free Agency; however, it remains to be seen whether, in this CBA environment, the NBA will experience Free Agent classes and Cap Space markets that arose in the past.