The steadying of the rates applies to all property types, except for retail power centers and central business district office properties. It is the apartment sector that has the lowest required returns of all the property types at 9.2%. In the fourth quarter of 2004 going-in capitalization rates increased 10 to 20 basis points compared with the third quarter for industrial warehouse, regional mall, apartment, and hotel properties; while the terminal capitalization rates increased 10 to 20 basis points for industrial warehouse, industrial research & development, regional mall, neighborhood and community retail center, apartment, and hotel properties.

Washington, DC, has been a hot market for investors in most property types for the last few years--for example, in the apartment sector, the District ranks number six out of 42 US markets. RERC's forecast for the city's average going-in cap rate is 7.8%, and 8.4% for the average terminal cap rate.

As national going-in and capitalization rates across the country experience stabilization or a slight increase, property values will stabilize, as well. "We believe these increases are going to be measured and slower, and as they continue to rise they'll be offset by the income side of the equation," RERC assistant vice president Brian Velky tells GlobeSt.com. "The economy will improve, vacancies will decrease and rents will increase as we get in a more stable economic situation and that will be able to offset measured increases in rates."

As a result, the market will not yield the soaring appreciation seen as of late. "Value appreciation is going to slow and will probably stabilized around an inflationary level of 2.5% or 3%," Velky says. "The current sellers' market looks like it may be about to end, at least for several property types," RERC CEO Ken Riggs notes in a statement. "Investors need to remain focused on overall performance as we enter a new era of increasing capitalization rates."