The sharp rise in interest rates has certainly affected all asset classes in the commercial real estate market. Across the board, we are seeing fewer transactions and rising cap rates for office, retail, warehouse, and even multifamily sales. Prior to 2022, multifamily assets were widely considered one of the most stable investment properties, boasting some of the lowest cap rates. Depending on the property, unit mix, location, and unit count, it was not uncommon for apartment buildings to be trading below a 5% cap rate. One driver of this was historically low interest rates.

While still considered desirable and stable investments, and despite vacancy rates not rising, multifamily properties have been affected by the higher interest rates. In Snohomish, Skagit, and Whatcom counties, there have been fewer multifamily properties listed and those that are listed are sitting longer and are being marketed with higher cap rates and at a lower per unit price. Based on comparable sales, our experience, and conversations with commercial appraisers, multifamily cap rates in Snohomish are transacting between 5.8-6%, in Samish they are transacting between 6-6.5%, and in Whatcom they are transacting between 5.7-6.2%.

All that said, multifamily assets remain highly sought after. Currently, many successful multifamily transactions do not involve traditional financing. For instance, there are many investors able and willing to pay cash and we are also seeing more transactions through seller financing.