Multifamily cap rate compression, especially in key Sunbelt and Mountain West markets, continues to defy conventional expectations. Recent trades in the low-to-mid 4% range, including a 4.12% in-place rate on a recently sold EMBREY asset in Denver, point to strong investor conviction even as the U.S. Treasury averages a rate around 4.4%. This trend is reinforced by a sharp slowdown in new multifamily starts, setting the stage for a rent growth rebound as deliveries taper through 2026.
Multiple forces are converging to support this multifamily cap rate trend, and broader pricing environment. Attractive debt availability, driven by expanded agency lending and the return of commercial lenders, is bolstering purchasing power. Fiscal tailwinds, including the proposed reinstatement of 100% depreciation, further elevate post-tax return expectations. Additionally, a resurgence in deal volume and rising single-asset transactions suggest renewed appetite for hard assets in periods of economic uncertainty.
Investors are recalibrating expectations around long-term treasury yields and embracing multifamily real estate as a resilient, cash-flowing hedge. With global dry powder reaching historic highs, competition for stabilized assets is intensifying. In this context, lower going-in yields are being viewed not as a concession, but as a strategic positioning move in advance of the next growth cycle. Despite aggressive pricing and the tightening multifamily cap rate trend, confidence is returning to the multifamily real estate market.
