CHICAGO-Capitalization rates for multifamily rental asset sales are as low as 5.5%, according to Marcus & Millichap Real Estate Investment Brokerage Co., the latest to weigh in on the robust health of the market. Previously, Appraisal Research Counselor predicted in its first quarter “Residential Benchmark Report” that sales volume for larger city properties could hit $400 million this year, with deals so far averaging a 6.74% cap rate.

“The market continues to be a battleground between private investors, condominium converters, pension funds, and to a lesser extent, REITs,” Appraisal Research Counselor notes. Marcus & Millichap reports prices surged 14% last year to $66,547 per unit, and shows no sign of abating.

“Transaction velocity appears to be accelerating in 2004 as investors are being lured to the Chicago market by significant price appreciation,” according to Marcus & Millichap’s “Chicago Apartment Research Report.” “The greatest appreciation is in the city, where anxious condo converters are bidding up prices for apartments.”

Robert Gecht, chairman and president of Albany Bank & Trust Co., told a Commercial Forum crowd this week that condominium converters are driving prices beyond the point where deals work. “It’s very hard to buy an apartment building today in any area where there’s a condominium conversion premium,” Gecht says.

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