Analysis

The figures contained herein focus on the multifamily real estate outlook for metro area apartment buildings and/or complexes with a minimum of 12 units.

Small-scale multifamily properties consisting of duplexes, townhomes or condos do not accurately affect local capitalization rates (cap rates), vacancy or rental rates and are therefore excluded from this analysis.

Market Overview

Cap rates compressed last year signaling higher demand and sale prices. The average sale price per unit was $52,323 with a cap rate of 7.05%. For the most part, newly built apartment communities are not being listed for sale, therefore an estimated cap rate for this type of project is +/- 6%.

The average vacancy rate for projects sold in 2021 was 5.89%. Rental rates for multifamily properties in the metro continue to increase, as does supply. Of the properties trading this year, average monthly rental rates were $524.50 (1-bedroom), $656.83 (2-bedroom) and $725.00 (3-bedroom).

Looking Ahead

Multifamily investors benefited from falling interest rates and an overall lack of supply, driving an increase in sale prices and rental rates. A projected increase in interest rates, as well as an influx of multifamily projects to the market, will contribute to the bottoming out of cap rate compression.

The owner-occupied residential housing boom of 2021 created a housing shortage forcing more people to rent, therefore increasing rental rates. With the addition of new multifamily to the market, rental rates will ultimately be forced down.

Significant transactions completed

  • 906  10th  Street  SE,  Cedar  Rapids10th  Street  Brickstone Apartments — 30  units  sold  for  $2,300,000  at  a  6.34%  cap  rate (including TIF value)  or  7.14%  (excluding TIF value)

Large-scale mixed-use projects or in progress