Pittsburgh Cap Rates

[Chris Townley]

Hi All,

I'm looking at a package of multifamily buildings (~30 units in 5 buildings) in PGH, in the Friendship neighborhood (They're all off of Friendship Ave, between Penn Ave & Baum Blvd). I was hoping someone could give me an idea of what to expect for cap rates and vacancy rates in the area. My assumption right now is around 7% for cap rate, and 5% for vacancy.

Any other opinions about the area that people want to share, I'm all ears.

Thanks,

Chris

[Blake McLaren]

Chris,

I think you're probably on target for your cap rate estimation as well as vacancy (currently just under 5% for 2015).  Take a look at some of the new builds, specifically in East Liberty and downtown.  Historically Pittsburgh has been able to absorb aprox. 300-500 new units with affecting rental prices, though there are 5000 slated to come online over the next 4-5 years.  A few of the larger companies in town are already beginning to see a compression in their prices, and slightly higher vacancies and it's a trend that will probably continue for a few more years until things even out.  Just to be frank, many renters are asking themselves if they would rather live in a brand new building or a 100-130 year multifamily.  

Food for thought.