2026 Multifamily Outlook: What’s Ahead

As the new year begins, we at Hamilton Zanze believe that 2026 will be a period of meaningful progress for the apartment industry in general and for our portfolio in particular. Before exploring that outlook in more detail, I want to acknowledge the challenges of the past few years.

Market headwinds, including muted rent growth and elevated interest rates, have impacted performance across the industry and are acutely seen in lower distributions to investors.

Elevated supply remains a challenge, but is tapering. A surge in new deliveries—over one million units were added across the U.S. in 2023 and 2024—placed pressure on operating fundamentals by moderating rent growth and increasing vacancy levels. Historically, the balance between supply and demand averages about 348,000 units delivered per year. This oversupply softened renter demand, while elevated interest rates further slowed transaction activity.

Despite these challenges, our core 1031 exchange business remains strong. Investor demand for tax-efficient real estate solutions continues to drive activity, and the HZ Evergreen Fund remains a key part of our long-term strategy.

As we enter 2026, we believe the foundation is in place—both internally and externally—for a stronger period ahead. After a year of recalibration across the multifamily landscape, supply and demand are coming back into balance in many markets, capital is becoming more available, and pricing resets are taking hold. These shifts bode well for Hamilton Zanze and our investors, and we believe the work we have done over the past several years positions us to take advantage of the opportunities ahead. Throughout this period, our approach has remained steady: focus on fundamentals and make decisions that safeguard long‑term value.

That foundation carries particular meaning this year, as we mark our 25th anniversary. A core part of our evolution has been building a comprehensive pathway to help investors grow and build generational wealth. Our 1031 and 721 exchange solutions—together with the HZ Evergreen Fund—create a continuum designed to provide diversification, tax efficiency, durable income, and streamlined estate planning. It is a platform built to support investors across any market cycle, not only during periods of growth.

The following will share how we see the multifamily landscape evolving, the priorities that will guide us this year, and why we remain confident in the enduring strength of our business and the long-term value it can deliver to our investors.

2025: A Year of Recalibration

The market is still working through elevated interest rates and the effects of new supply in select regions where absorption has taken longer than expected, which has kept rent growth flat.

However, the broader construction pipeline is contracting sharply. New starts have dropped more than 50% from peak levels. Developers are facing tighter underwriting standards, elevated construction costs, and more limited access to capital. In practical terms, fewer new starts today position us for healthier supply-demand dynamics tomorrow. We expect that the decline in new units will drive increased occupancy rates and meaningful rent growth in existing properties beginning in late 2026, with momentum building into 2027 and 2028 as supply and demand continue to realign.

The HZ Evergreen Fund: Continued Growth

One of our major strategic initiatives is the continued growth and diversification of the HZ Evergreen Fund, including its role as a 721 exchange solution for investors seeking a direct pathway into the Fund.

In 2025, the Fund enhanced diversification through three new property contributions and delivered a 20.5% distribution increase in Q2. Looking ahead, we anticipate acceleration of the properties contributed in 2026, offering investors access to an increasingly diversified portfolio of real estate assets nationwide.

Our long-term objective is clear: build a durable, professionally managed vehicle that can serve investors seeking continuity, diversification, and a tax-efficient platform designed for building generational wealth and easier estate planning.

Operations: Disciplined Execution

On the operations side, we have remained methodical in our approach. While revenue growth has been muted in certain markets due to slower absorption, many of the markets where we operate appear to be moving closer to supply-demand balance.

On the expense side, we are managing two key dynamics:

• Technology and efficiency. We have implemented new property management technologies to deliver cost savings and drive resident retention—which is especially important in more competitive markets. We are also deliberate about not spending ahead of measurable results.
• Aging communities and capital planning. As our communities mature, maintaining their quality requires thoughtful capital planning. Our approach is proactive. We prioritize projects that protect the asset, support retention, and improve the resident experience, while avoiding over-improving in ways that do not translate into durable NOI.

Across the portfolio, we continuously evaluate each property’s path forward, including what to hold, what to improve, and when to consider an alternate outcome. Those decisions are grounded in property-level fundamentals, capital needs, and long-term return potential.

Staying Active: Our Portfolio Growth

Today’s transaction environment is defined more by recalibration than by broad market swings. Treasury rates and the yield curve continue to influence pricing, and buyer behavior can change quickly as financing conditions shift.

Even amid a cautious market, our team has stayed consistently active, sourcing opportunities across both DST and JV structures and positioning ourselves to move when compelling buying opportunities emerge. In 2025, alongside investors, we sponsored the acquisition of 10 properties, for a total purchase volume of $1.2 billion, often in situations where motivated sellers created an attractive basis. While deal flow remains relatively slow, we continue to see distressed opportunities driving outsized returns through pricing dislocation. These opportunities directly align with our long-term strategy.

Sponsored 2025 acquisition highlights include:

• Reno, Nevada, Portfolio: Acquired three apartment communities off-market using a mix of DST and joint venture capital. We were able to assume a highly accretive, fixed-rate agency loan that ensures strong cash flow throughout the hold period.
• Kansas City, Kansas: Acquired Legends 267, a six-story, Class A property with no competing supply under construction within a 10-mile radius, in an off-market transaction.
• Chattanooga, Tennessee: Acquired 1400 Chestnut apartments, a high-quality community in a submarket with limited incoming supply.

The Return of Big Bank Lending

We have already seen big banks return to the debt market. This matters because consistent debt execution helps bring buyers and sellers back to the table and drives more normalized pricing. In particular, 1031 exchange investors are returning to the market, which has led to increased investment sales activity.

At the same time, debt capital from private credit and insurance companies remains competitive. Institutional equity is also starting to move off the sidelines as pricing has reset and confidence around the cost of capital has improved. Add it all up, and we anticipate that investment sales volume will continue to accelerate in 2026.

Insurance: A Win Win

Insurance costs have been a major pressure point across the industry. The good news is that the property insurance market has softened for the second straight year, and we restructured our liability insurance tower, so we expect premiums to decline by roughly 19%—similar to last year’s reduction. We also secured two meaningful policy enhancements for the program. These positive results reflect not only improving market conditions but also our proactive approach to risk management and the long‑term relationships we’ve built with our insurance partners across London, Bermuda, and the domestic markets.

HZ Capital Partners: Fund I Close and Fund II Launch

We closed HZ Capital Partners Fund I in 2025, raising $53 million and exceeding our $50 million target. With Fund I complete, we are now launching Fund II, a $100 million investment vehicle designed to build on that foundation.

GP Fund II is structured to identify opportunities across the multifamily capital stack where our platform can drive targeted operational improvements and capitalize on pricing dislocations that create attractive entry points.

2025 Private Credit Offering: Fully Subscribed

Private credit remains an area of growing interest for many investors, particularly as a complement to traditional real estate investments. Through our joint venture with Limekiln Real Estate Investment Management, we sponsored the acquisition of Freddie Mac K-165 B-Piece securities—a pool of 10-year, fixed-rate, stabilized multifamily loans in 2024.

This program was fully subscribed in 2025, reflecting strong investor and institutional demand for thoughtfully structured credit exposure. We will continue to evaluate opportunities in this space with the same discipline we apply across our platform, focusing on credit quality, structure, and return potential as we pursue additional investments when the market presents attractive opportunities.

San Francisco Portfolios

Through our affiliate, Revere Housing, we expanded our presence in San Francisco. We added two note portfolios (89 apartment buildings) to the platform, augmenting our existing portfolio of 60 properties consisting of over 3,400 units.

This expansion strengthens our operating scale and positions Revere Housing and our property manager, Mission Rock Residential California, to become one of the larger multifamily operators in the city. We executed this strategy primarily through joint ventures and strategic partnerships, leveraging our market knowledge and operational capabilities to identify value and navigate local market dynamics with solutions-based discipline.

Final Thoughts

For investors and their advisors, multifamily’s long-term outlook remains optimistic. With the right sponsor and a focused approach, institutional-quality communities can offer the potential for consistent income, tax advantages, portfolio diversification, and long-term capital appreciation. Stated another way, multifamily investing remains an effective vehicle for building generational wealth.

Since our launch in 2001, Hamilton Zanze has built a range of vehicles designed to support our investors across cycles, not just in strong markets. We thank you for your continued trust in us. We are grateful for the opportunity to invest alongside you, and we look forward to building on this foundation for the next 25 years and beyond.

Kurt Houtkooper
CEO