Cap Rates Lower Than Advertised

REIT.com interviewed Paul Curbo, portfolio manger for INVESCO, about market conditions for commercial real estate.  The article (and video) include a number of insights into the various sectors of investment real estate.  What caught my eye was the discussion of cap rates and the examples he cited:  apartments changing hands at 5% cap rates, and 4% in California.  While the fundamentals are entirely different today than they were then, this pricing is reminiscent of  the frothy markets 2006 and 2007.  Curbo's observation that a development pipeline will provide immediate value add is true as long as pent up demand for units continues.  At the rate that units are being built and mothballed construction is being restarted, that backlog will not exist for long.