The average prime multifamily cap rate has risen by 155 basis points to 4.92% since Q1 2022, according to a new analysis from CBRE. That is 70 bps higher than the pre-pandemic 2018-2019 average.
"Underwriting assumptions for prime multifamily assets are likely nearing their peak," CBRE predicted, "though some additional expansion is likely" if the Fed raises rates again or long-term rates continue to climb.
"The spread between going-in and exit cap rates fell to 15 bps at the end of Q3 – the smallest spread since CBRE began a quarterly survey of its investment professionals in 2014," the report noted. Unless economic conditions get significantly worse, the spread is likely to remain positive in the near-term.
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