Top 4 Lowest Cap Rates are in California

California takes the top 4 spots in lowest Cap Rates (all <5%) for multi-family housing per the H1 2015 CBRE North America Cap Rate Survey.  Nationwide, Tier I, II, III markets are averaging just above 5%. As investors chase returns cap rates are driven lower, helped by near-zero interest rates.  Below is a table of Class A Cap Rates in US metros:

Multifamily Suburban Class A Cap Rates in US Metro Areas

Roughly 1/3 of the $110 billion invested in U.S. commercial real estate in Q2 2015 has been multifamily acquisitions. 

Investment in U.S. multifamily product continues its extraordinary run, reflecting solid confidence in future market and asset performance. Drawn in by solid fundamentals, investor interest in the sector remains high, per sales activity and underwriting trends. Equity and debt investment volumes continued to rise, along with transaction sales prices. Cap rate declines have been minimal, which signal total projected investor returns are close to bottom,
— Brian McAuliffe, Executive Managing Director, Institutional Properties, CBRE Capital Markets.

However, value-added opportunities remain abundant as we are seeing investors paying premiums for stabilized multifamily properties.  In other words, acquiring/renovating/stabilizing/re-positioning multi-family properties continues to be a lucrative business model in today's market.