Cap-Rate Gap Between Older, Newer Properties Starts to Narrow via Multifamily Executive Magazine

Building age is a crucial factor in every investment decision, one of the first considerations when picking a core, value-add, or opportunistic strategy. After all, newer and older buildings come with different valuations, affecting investors’ preferences and investment opportunities throughout the cycle.

Yet, as the upturn matures, the gap between cap rates on newer and older buildings may be starting to narrow.

The price-per-unit and cap-rate data by building age (see chart) show how preferences for newer or older buildings have evolved over the last decade. Before the recession, between 2005 and 2007, the price-per-unit premium between newer and older properties went from about 40 percent to more than 60 percent.

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