Mar
21

Secondary Multifamily Markets Likely to See More Cap Rate Compression

By
– Multifamily Executive

It seems to happen at this point in every cycle: Core assets in primary markets recover first, followed by a trickle-down into secondary markets, B assets, and value-add deals.

But this year feels different. As more investors increase their risk tolerance and cast a wider net in search of yields, that trickle may be more like a flood.

“It’s happening faster this time; there’s more capital floating around at this point in the cycle than usual,” says Dan Fasulo, managing director of New York-based market research firm Real Capital Analytics. “Secondary markets are certainly picking up steam. The promise of extra returns really gets investors to venture out along the risk spectrum.”

Last year offered a brief window of opportunity to play it safe. The ultra-low yield on the 10-year Treasury produced a big spread between cap rates and interest rates. The ability to borrow at 4.25 percent covered many sins, allowed many deals to pencil out, even given a low cap rate.

ARTICLE SHORTENED DUE TO LENGTH….

LINK TO ARTICLE HERE

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