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SAN FRANCISCO-The end of the cap rate decline may be here or near for the apartment sector. Dan O'Connor, managing director of global forecasting and research for Global Real Analytics, publishers of the National Real Estate Index, tells GlobeSt.com that while demand for class A assets across most property types continues, the record high prices being paid for apartment properties is becoming a thing of the past.

"Two forces are at work; there will be less demand going forward for condo conversion properties as it is pretty clear the owner-occupied housing market has cooled in many regions, and apartment fundamentals are getting better," says O'Connor. "As a result, there will be fewer ridiculously low cap rates being paid for convertible apartment properties, while apartments will continue to perform well for the reason they should, better operating fundamentals."

The early returns on the Rent Monitor report for the second quarter, which will be released this month, show "very healthy increases" in apartment rents, says O'Connor. GRA's Value Monitor report for the second quarter, which is expected to back up his speculation with regard to multifamily cap rates, won't be out until early August. "I don't expect to see a 100 basis point jump [in apartment cap rates] in one quarter, but I expect to see that they have plateaued and maybe nudged higher," he says.