Cap Rates, Interest Rates, and Value: What Investors Are Doing in Des Moines Right Now

The multifamily market has entered a new equilibrium—one defined less by expansion and more by precision. Elevated interest rates and shifting capital markets have changed the math behind every acquisition, but for disciplined operators and investors, this new phase offers opportunity rather than obstruction.

Cap rates in Des Moines have adjusted to reflect these conditions. Recent data shows luxury and core assets trading around 5.2%, while value-add opportunities have widened to the 6.5–6.8% range. Loan pricing has followed suit, with qualified borrowers typically landing in the low-to-mid 5% range. Meanwhile, occupancy across the metro remains stable at roughly 92–93%, supported by modest rent growth near 2–3%. The result is a market that is neither overheated nor distressed, just rational.

Rising debt costs have created a higher bar for returns. Every percentage point increase in interest rates requires more NOI or a lower purchase price to achieve the same yield. That recalibration is reshaping investor behavior. Buyers are underwriting conservatively, assuming flatter rent growth, higher expense inflation, and longer hold periods. Many are focusing on stable, cash-flowing assets rather than speculative value-add plays.

For operators, this environment sharpens the focus on what can be controlled. Expense management, vendor negotiations, and operational efficiency have become the levers that preserve margins as financing costs stay elevated. In Des Moines, where new supply has been more measured than in coastal or Sun Belt markets, owners who execute well can still drive NOI growth even without aggressive rent increases.

At Hammer & Hampel, we’ve adjusted our strategy accordingly, focusing on steady, fundamentals-based performance across our Des Moines portfolio. Through tight KPI tracking, improved collections, and controlled R&M spending, we continue to create value independent of market cap-rate compression. That discipline not only protects downside risk but positions each asset to capture upside when capital markets eventually normalize.

Across the broader Midwest, investors are shifting toward patience. Fixed-rate debt, cleaner operations, and longer hold horizons define the current playbook. With inflation moderating and new development pipelines slowing, the groundwork is being laid for improved stability in 2026 and beyond. When rates begin to ease, assets with strong in-place operations will be first in line to reprice upward.

For investors with a long-term view, Des Moines represents a market in balance: affordable, growing, and increasingly attractive as capital flows away from oversupplied metros. Elevated borrowing costs may have tempered momentum, but they’ve also restored discipline. The next wave of value creation will favor those who managed efficiently through this period, not those who waited for perfect conditions.

(Sources: Apartment Loan Store, Select Commercial, MMG Real Estate Advisors, Northmarq)