Apartment capitalization rates increased in most US regions in the three months to July 2009, according to data reported by Real Capital Analytics (RCA). These increases are consistent with the trends of decreasing rents and rising vacancy rates reported for the national apartment market in the second quarter of this year.
By comparing the average apartment cap rates that were reported by RCA for May 2009 with those reported for July 2009, we can conclude that cap rates increased in four out of the six US regions used by RCA, while they remained stable in one and decreased in the other one.
In particular, as the graph below indicates, the average apartment cap rate increased the most in the Southeast, as it climbed 90 basis points, from 6.9% in May 2009 to 7.8% in July 2009. The Northeast registered the second largest increase of 30 basis points in the average apartment cap rate, which rose from 6.2% in May 2009 to 6.5% in July 2009.
Average apartment capitalization rates increased by 20 basis points in both the Mid-Atlantic and the West. More specifically, the average cap rate in the Mid-Atlantic region increased from 7.1% in May 2009 to 7.3% in July 2009, while the average cap rate in the West increased from 5.9% in May to 6.1% in July of this year.
Interestingly, apartment cap rates in the Midwest, compressed over the period May-July 2009 as the average dropped from 7.6% in May to 7.3% in July. Apartment capitalization rates in the Southwest remained stable on average at 7.1%.
Looking at variations in apartment cap rate levels across regions in July 2009, we note the West and the Northeast as the two regions with the lowest rates of 6.1% and 6.5% and the Southeast with the highest cap rate of 7.8%.
Apartment Cap Rate Change May-July 2009
Sources: Real Capital Analytics; Property-Investing.Org
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