Cap Rates Continue to Fall
After plummeting 37% year over year in April, apartment sales jumped 22% in May as the multifamily industry posted $9.1 billion in sales volume, according to New York-based commercial real estate data and analytics firm Real Capital Analytics (RCA).

The garden sector led the growth with a 31% year-over-year sales volume increase to $6.4 billion in May. As cap rates have fallen on trophy high-rises, more investors are going further out for yield. "Suburban A's and B's were less in favor [after the recession] than they are today," says Blake Okland, head of U.S. Multifamily for ARA. "There's just broader acceptance of a wider range of geography and product type by a broadening capital pool."

Mid- and high-rise assets, however, increased only 5%, to $2.7 billion. “Despite this weak activity and an outright decline in volume in April, volume is still up 34% from a year earlier,” RCA said in the report.

Meanwhile, cap rates continued to fall, dropping 30 basis points, to 5.9% nationally. RCA reported that garden apartment cap rates stood at 6.2%, while mid- and high-rise cap rates were at 4.9%. Garden apartment cap rates fell 20% year over year, and mid- and high-rise cap rates fell 30 basis points.

With the amount of capital coming into the sector--from both domestic and international sources--it's no surprise cap rates continue to decline. "I see no shortage of capital coming into the market," says Brian Ward, president of capital markets and investment services at Collier's International. "In fact, I see an increase of capital coming in."

Portfolio- and entity-level transactions accounted for almost one-quarter of May’s sales. Private buyers, enjoying a point in the cycle when they have greater buying power, accounted for 67% of all activity. Private sellers accounted for 44% of all dispositions.