LOS ANGELES—While pricing for trophy assets in certain markets has exceeded the levels reached in 2007, no property sector has managed that feat in terms of 12-month sales as yet. It's left to multifamily to potentially be the first; CBRE says we could see dollar volume for apartment properties edge past '07 by Dec. 31.

Citing Real Capital Analytics data, CBRE says multifamily sales volume for the first nine months of 2014 totaled $73.1 billion, while reaching $27.5 in the most recent quarter. If the current pace is maintained through the end of the year, sales volume could reach $105.2 billion, just nosing past '07's level of $105.1 billion.

RCA's most recent data suggest that the trend will continue. Sales of significant apartment properties totaled $10.1 billionin October, a 10% increase year over year, RCA says. Volume in the garden apartment sector saw an especially strong gain of 29% over October 2013 levels, while sales of mid/high-rise properties fell 31% Y-O-Y after rising 75% Y-O-Y in the third quarter.

Property prices increased 5% nationally in Q3 and have gone up 16% over the past year, according to the Moody's/RCA CPPI. RCA says the biggest price gains recently have been in tertiary markets in the Southwest and Northeast/Mid-Atlantic, along with South Florida and the New York City boroughs.

“Multifamily continues to lead commercial real estate through the recovery and into expansion,” says Brian McAuliffe, senior managing director at CBRE Capital Markets for multifamily. He cites three trends characterizing recent investment activity by buyer category.

“First, private non-institutional buyers' share of total activity has increased from 50% in 2013 to 59% so far in '14,” he says. “Second, foreign capital is playing a larger role, accounting for 6% of this year's total apartment investment through Q3 2014—up from 5% in 2013—and 10% of all mid/high-rise investment—up from 3% in 2013. Third, REITs are playing a less active role in the investment arena, with market share of acquisitions falling from 20% last year to 9% this year.”

And although the pace of new construction has had many observers questioning whether the market is verging on overbuilding, to date that hasn't happened. Demand as measured by net absorption grew at an annual rate of nearly 289,900 units in Q3. Meanwhile, rentable stock has grown by just 256,700 units over the past year, bringing the average vacancy rate down to 4.3%, or 60 basis points below the historical average.

The market that contributed the most to national demand growth over the past four quarters were Houston, New York City; Los Angeles; Dallas; Austin; Washington, D.C; Atlanta; Seattle; Miami; Denver; Phoenix; Raleigh; and Orange County, CA. Combined, they accounted for more than half of the period's total net absorption. Except for Richmond, VA, the markets with the strongest growth in demand—over 3.5% from a year earlier on average—were all in the Southeast, Southwest or West: Austin, Raleigh, El Paso, Salt Lake City, Charlotte, San Jose and Nashville.

Over the course of the past year, CBRE says, improving job growth and the increasing trend toward renting were key factors driving demand. Looking ahead, the firm observes that although household formation remains weak by historical standards, the multifamily sector could experience renewed momentum as the improving economy and rising incomes continue to unleash pent-up housing demand. If that happens, the sector could exceed its recent gains over the next 12 to 18 months.