The latest findings from CBRE’s bi-annual Cap Rate Survey (CRS) reveal a pivotal moment for the multifamily sector. Market participants largely anticipate that cap rates will remain steady or experience slight declines over the next six months, signaling cautious optimism for the asset class.
However, market sentiment varies significantly depending on location, with a notable divide between Gateway and Sun Belt markets.
Gateway Markets: Optimism Fuels Decline in Yields
In major Gateway cities like New York, Boston, Washington, D.C., Los Angeles, San Francisco, and Seattle, nearly 90% of survey respondents expect cap rates to decline. This bullish sentiment reflects the remarkable recovery in urban multifamily properties, particularly in well-amenitized neighborhoods that have rebounded strongly post-pandemic.
These cities continue to attract investment thanks to their established infrastructure, deep rental demand, and enduring appeal to renters seeking vibrant, connected lifestyles.
Sun Belt Markets: Stabilization Amid Supply Pressures
Conversely, sentiment is more cautious in high-growth Sun Belt markets, including Raleigh, Charlotte, Atlanta, Nashville, Dallas, Austin, Phoenix, and Denver. A recent construction surge has left many of these markets grappling with an oversupply of multifamily units.
As a result, most respondents foresee cap rates remaining flat in these regions, reflecting a more tempered outlook compared to their Gateway counterparts.
Looking Ahead: Gateway Markets Maintain an Edge
The CRS results were compiled before recent market volatility, yet the findings still suggest a strong edge for Gateway markets. While the recent dip in the 10-Year Treasury yield is welcome news for multifamily valuations nationwide, urban centers with established multifamily infrastructure are expected to outperform in the near term.
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