CAP Rates for Apartment/Multifamily Properties in Philadelphia Pennsylvania

Q1  2026 Multifamily Cap Rate Report

Updated March 10, 2026

Multifamily Cap Rates Flatten after Expanding Slightly

In Q1 2026, the main fundamentals behind multifamily cap rates softened, keeping cap rates flat. According to Freddie Mac, rents are now trending slightly downwards, net absorption of new units has slowed, and vacancies and rental concessions have edged slightly upward.  Despite these market negatives, prices have mostly held steady and investor confidence is on the upswing.

According to CBRE, there was a 9% rise in multifamily cap rates in 2025. This curve plateaued during the first quarter of 2026 with multifamily property averaging on all classes combined a cap rate of 5.6%.   Still buyer sentiment improved in early 2026 as Return on Investment (ROI), Cash on Cash return, and Internal Rate of Return (IRR) slightly improved.  This is assumed to mostly be the result of slightly lower mortgage rates during January and February 2026.

Tug of War Between Increasing Rents and Lowering Vacancy

Although long term interest rates took a dip in January and February, the war in Iran on February 28th immediately raised them again. This combined with a lack of rental increases has kept multifamily property prices from increasing.  Property managers are putting occupancy above rent growth and are having to use rental concessions sparingly to lower vacancy.   It takes rent growth to increase property values and thus lower cap rates.  This is not the trend now.                                                                                               

Although the March 2026 jobs report showed improvement, overall  job growth is expected to slow through the second half of 2026.  With the high cost of living, most renters just cannot afford higher rents.  Vacancy is currently at 4.8% and is expected to increase to 5.1% by the fourth quarter of 2026 according to Fannie Mae.  

Why You Should Invest  with a Long-Term Hold Strategy Today

Investing with a long-term hold strategy seems prudent today. With the absorption of new units slow, rents slightly declining, and vacancy and rental concessions on the rise, it will be difficult to increase rents enough to keep up with inflation.  Again, rental increases are the most reliable way to raise CRE property values, which will take time in this market. 

To be more specific, don’t plan on raising rents much in the near future.  And if there was ever a time to burn the midnight oil to find a property with under market rents, it is now.  Although inflation is in the low 2s now, the high price of oil and a possible recession around the corner points toward a 6-year hold where a higher ROI can be realized.