Boston-based Torto Wheaton is the econometric market analysis unit for CB Richard Ellis. According to TWR analysis multi-family housing cap rates are strongly driven by local market fundamentals, including rent levels, rent growth and general price inflation.

TWR experts state that a demand surge in Oakland pushed the apartment vacancy rate below 3% last year. Even with a slowing demand the tight market is expected to cause a rise in rents of about 22% by 2005. Net operating incomes are expected to grow by as much as 54%. Further, this city's strong multi-family housing market will likely push cap rates down to 6.18% by 2005.

Multifamily housing cap rates in many markets are expected to decrease in the coming years due to rising rent levels, according to TWR experts, but the most significant decrease is likely to be Oakland with a possible 234 basis point decrease over a six-year period.