2023 NMHC Annual Recap: Cap Rates, Operating Fundamentals and Strategy Shifts

February 8, 2023

Markerr attended the National Multifamily Housing Committee (NMHC) Annual Meeting on January 31st – February 2nd in Las Vegas, NV. The mood was still fairly good, but certainly more subdued relative to the frenzy last year. The main topics of conversations centered around operating fundamentals in ’22 and ’23, cap rates, and strategies for ’23.

Operating Fundamentals

’22 was widely considered a tale of two halves. 1H22 was a tremendous year with growth continuing on the rent growth front. Markerr data shows that multi-family year-over-year rent growth peaked at 9.5% in April 2022. 2H22 rent growth decelerated to low single digits. Consensus expectations are for rent growth to continue along at the moderate pace for the remainder of ’23. Markerr has a rent forecast that calls for 4.2% YoY rent growth in ’23. Along with slowing rent growth, ’23 will likely include higher expenses for the key line items of property taxes, insurance, and wages. 

Cap Rates

Cap rates began increasing (values down) along with the rapid rise in interest rates from the Fed. The 10-year treasury started ’22 at 1.7% and ended the year at 3.9% (+220 bps). High-yield bonds started ’22 at 5.0% and ended the year at 8.8% (+380 bps). Cap rates typically trade in the middle of the risk spectrum, and also rose during the year. This rapid rise in rates led to negative leverage and a slowdown in transaction volume in 2H22. 


With negative leverage remaining a concern in ’23, a number of investors are waiting on the sidelines to start the year. Those holding onto dry powder are looking for potentially distressed debt deals to occur in 2H23. Those that are continuing to put capital to work are incrementally shifting back into higher yielding strategies like core-plus, value-add, and development. Still other investors are finding that with bidding tents less full they are able to capitalize on deals that have fairly deep asset values cut baked into them.