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Multifamily cap rates begin expanding again

by Reg Clodfelter

The mean capitalization rate on U.S. multifamily properties increased 20 basis points during the second quarter to 6.6 percent and is now 40 basis points higher than the 6.2 percent trough seen in the first quarter of 2013, according to Reis Inc.

The expanding cap rates in the sector are another sign that, after seeing the earliest recovery in investor interest among major property types, interest in the sector is beginning to wane — a notion supported by the fact that transaction volume in the sector dropped to $98.4 billion for the year ended June 30, 2014, down from $106.8 billion the year before, when transaction volume increased significantly among all other major property types, according to Real Capital Analytics.

Multifamily cap rates peaked at just under 7.4 percent in early 2010, around the same time office cap rates peaked at 8.3 percent, though office cap rates have continued to fall, decreasing 20 points in the second quarter and setting a

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