**Apartment Buyers and Sellers Report Improved Sentiment in Q1 2025**
During the first quarter of 2025, the Federal Reserve announced a slowdown in its Effective Federal Funds Rate. Simultaneously, policy changes from the Trump administration influenced the equities market, consumer sentiment, and trade, contributing to a climate of economic uncertainty.
Despite these headwinds, sentiment among both buyers and sellers in the multifamily sector showed notable improvement, according to a new survey conducted by CBRE.
Key findings include:
– Core-asset buyer sentiment was 65% positive in Q1 2025, a sharp increase from 44% in Q4 2024.
– Core-asset sellers showed decreased negativity, with 67% reporting neutral sentiment, up from 57% in the previous quarter.
– Value-add buyers also demonstrated slight improvements in positive-to-neutral sentiment, while value-add sellers showed a higher concentration of neutral views.
– The strongest sentiment was observed in the Sun Belt across all product types, and in San Francisco specifically for core assets.
Underwriting assumptions continued to stabilize for core multifamily assets, although those for value-add projects weakened slightly. Annual asking rent growth assumptions remained steady at 2.7% for core assets and 3.1% for value-add assets. CBRE analysts noted that this rent growth stability aligns with a broader recovery after a significant wave of new supply across various markets.
In terms of cap rates:
– Value-add assets showed a going-in cap rate of 5.32% and an exit cap rate of 5.42%.
– Core assets reported a going-in cap rate of 4.83% and an exit cap rate of 5.01%.
– While the spread between going-in and exit cap rates widened for core assets, the spread declined for value-add transactions.
CBRE analysts acknowledged that value-add underwriting metrics softened slightly in the first quarter. However, they remain optimistic about the sector’s outlook for the remainder of the year, stating: “We expect tailwinds in the multifamily sector as investors look to capitalize on improved market fundamentals, particularly in the core segment.”
