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Multifamily Investors Grow More Cautious in Underwriting Rent Growth
Going-in cap rates for multifamily rose 33 basis points nationally to 4.09% in the third quarter, a slightly more modest increase than Q2’s 39-bp rise, CBRE reported. Investors have reacted to heightened market volatility and higher borrowing costs by pushing cap rates up 72 bps over six months. However, cap rates have risen from record-low levels in Q1 and are still slightly below pre-pandemic levels.
Investors are underwriting 3.6% annual rent growth over the next three years, down from a 4.3% forecast in Q1 but more than the 3.1% average in 2014 to 2019. They’re more optimistic about rent growth in gateway markets, in a reversal of the pattern seen six months ago.
“Multifamily investors are being selective in their acquisition decisions in the current environment,” said Matt Vance, America head of multifamily research at CBRE. “While a bid/ask price gap exists for many assets, transactions are continuing to close.”
- ◦Sale/Acquisition
