Central Business District (CBD) apartment investments have comprised an increasing share of the transaction market. They’ve also had higher cap-rate compression than their suburban counterparts. The question is, if supply keeps flowing or the overall apartment market slows down, will CBDs continue to attract investors?
The share of CBD transactions has gradually increased since the end of the recession, from 13 percent in the fourth quarter of 2009 to nearly 20 percent in the second quarter of 2013, according to CoStar data.
In addition, the spread between suburban and CBD transaction cap rates has widened in the last six quarters, moving from about 60 basis points (bps) at the end of 2011 to roughly 100 bps by mid-2013. Since their peaks, CBD cap rates compressed by more than 110 bps, while suburban cap rates decreased about 85 bps.
Read more...Will CBD Investments Continue to Be the Center of Attention? - Dispositions And Transactions, Cap Rates, Local Markets - Housing Finance