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Apartment Sector Cap Rates Bottoming Out

SAN FRANCISCO-The managing director of global forecasting and research for Global Real Analytics tells GlobeSt.com that with the for-sale housing market cooling and apartment fundamentals improving, fewer condo converters will be paying premiums for apartment complexes.

By Brian K. Miller | Updated on July 16, 2006

(To read more on the multifamily market, click here.)

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.”

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