Midwest Markets Have Some of Nation’s Highest Cap Rates

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Cap rates for apartments remain historically low and are the lowest among major property types, as solid multifamily investment activity continued during 2022. Among the 150 apartment markets tracked by RealPage, there were 7,565 transactions totaling roughly $234 billion in 2022, based on data from Real Capital Analytics. While that dollar volume was down 24% from 2021, it was 57% greater than the sales volume prior to the pandemic in 2019. Cap rates among the top 150 markets averaged 4.54% during 2022, down 31 basis points year-over-year and well below the 5.39% average in 2019. Among regions, the Midwest posted the highest average cap rate of 5.05%, while the lowest average cap rate was in the West, at 3.99%. The South region posted a cap rate of 4.54%, matching the national average, while the Northeast region recoded an average cap rate of 4.80%. Among the nation’s 50 largest markets, the four highest cap rates were primarily in the Midwest, with the highest cap rate in Cleveland (5.58%), followed by Cincinnati (5.39%), Pittsburgh (5.20%) and St. Louis (5.18%). On the other hand, the lowest cap rates nationwide were in West region markets. San Jose posted an average cap rate of 3.59%, followed by Phoenix (3.68%), San Francisco and Los Angeles (both at 3.77%).