Mid-Year Outlook: 2025 Performance, Perspective, and Positioning for the Future

As we reach the midpoint of 2025, I want to take a moment to reflect on where we’ve been and where we’re headed. At the start of the year, we struck a bullish tone—anticipating monetary easing, improved deal flow, and operational upside. While not all predictions have come to pass, our core conviction remains: this is a time to be bold, smart, and deeply engaged in the market.

Strategic Optimism Based in Fundamentals

Back in January, we forecasted a strong year for multifamily investment, supported by the Fed reducing rates and declining new supply.

However, some headwinds have emerged: monetary policy has not loosened as much as anticipated, and we’ve yet to see the 1–3 rate cuts we hoped for in 2025. Now, midway through the year, while the landscape has evolved in unexpected ways, we continue to view opportunities to deploy smart capital this year as critical—positioning ourselves to capture projected operational upside in 2026 and 2027.

Navigating Evolving Market Dynamics

Capital markets have proven more volatile than anticipated. Early in the year, abrupt movements in credit spreads—particularly AAA spreads—combined with the Moody’s downgrade of U.S. debt, contributed to a temporary freeze in refinancing activity and heightened investor caution.
Geopolitical shifts—including new tariffs on materials like steel and ongoing global conflicts—have also impacted development economics. We are monitoring the impact of the tariffs on inflation, which may raise the cost of building new apartment communities.

On the financing side, talk of Fannie Mae and Freddie Mac privatization continues to create uncertainty, though both agencies remain essential pillars of multifamily finance. In response, we’ve broadened our lender relationships and remain adaptable.

Rent Growth and Operational Fundamentals

Leasing fundamentals have remained resilient through the first half of the year. Absorption is steady, and in several of our target markets, rent growth has increased meaningfully. While oversupplied metros are still working through elevated vacancy, we’re beginning to see the early signs of stabilization as new construction slows.

These conditions reaffirm the strength of our operating platform. The scale and structure of our 1031 exchange business continue to provide consistent deal flow, while our operational discipline ensures we can execute and perform across cycles. This combination allows us not only to minimize distress but to pursue attractive acquisitions with confidence.

At the end of the first quarter, our portfolio remained 93% occupied—the same as in the fourth quarter of 2024—but with key indicators now pointing to positive momentum as we enter the leasing season. Asking rents are rising and achieved rents are beginning to edge higher, signaling growing strength in the rent roll. Average vacant days are down 7%, reaching their lowest point in the past 12 months, and rental applications are up 12% quarter-over-quarter. As the leasing season gains momentum, we are well positioned for upward growth in the second half of the year.

Financial Stability Amid Capital Market Noise

At the start of 2025, we anticipated the U.S. 10-Year Treasury would settle between 4.0% and 4.5%. As of late May, it sits at 4.44%—in line with expectations. Yet deal flow hasn’t rebounded as strongly as we anticipated. Investors remain cautious, still navigating a mix of economic signals.

These moments reaffirm our belief that we are in the recovery phase of the investment cycle: valuations are down, cap rates are up, and return potential is greater. We are prepared to deploy capital strategically—targeting high-conviction markets identified through our internal tiering system and adhering to disciplined underwriting standards.

Portfolio Growth and Market Positioning

We projected to sponsor $1 billion in multifamily acquisitions and $250 million in dispositions for 2025. As of mid-year, we’re tracking toward those goals and actively pursuing new opportunities—especially in markets with heavier concentrations of supply, which are now seeing construction pipelines dry up. These markets present a compelling window to acquire high-quality assets at attractive pricing ahead of what we believe will be a rebound in fundamentals by 2026–27.

We’ve also seen an uptick in the deployment of 1031 exchange capital, supported by the return of the six major banks to the lending market. As financing has become more accessible, transaction volume has increased, and demand for our DST offerings has followed—many of which have filled quickly.

So far in 2025, we have sponsored the acquisition of two multifamily properties, with four more under contract. On the disposition side, we’ve completed two sales and have seven more under negotiation or in contract.

Sponsored acquisition highlights include:

• 1400 Chestnut Apartments in Chattanooga, TN and Arnada Pointe in Vancouver, WA (Closed): Acquired via Delaware Statutory Trust (DST) structures utilizing 1031 exchange capital.
• Reno, NV Portfolio (Under Contract): Pending acquisition of three apartment communities using a mix of DST and joint venture capital.
• Kansas City (Under Contract): Pending DST acquisition of a Class A property with no competing supply under construction within a 10-mile radius.

These transactions reflect both our long-term commitment to the 1031 platform and the flexibility to pursue GP-structured and secondary market opportunities when conditions are right.

We remain engaged in distressed and liquidity-constrained markets, where our proprietary tiering system allows us to identify high-potential targets with speed and clarity. Our ability to underwrite quickly and execute with operational confidence continues to make us a strong buyer in moments when others hesitate. This approach is particularly evident in our target markets, where high-income migration and constrained supply are setting the stage for durable rent growth.

Strategic Initiatives Moving Forward

HZ Evergreen Fund

The Evergreen Fund—built on the foundation of our proven 1031 strategy—continues to perform steadily and attract investor interest. The fund offers existing investors exposure to a diversified portfolio of multifamily assets, managed by our experienced team, and designed to deliver stability and flexibility across market cycles. Its capabilities are further enhanced by our Fannie Mae Credit Facility, which provides competitive pricing and operational agility.

Private Credit

Our expansion into private credit has extended our reach beyond property ownership to the debt side of the capital stack. We recently offered investors and partners a $20 million institutional investment opportunity in a Freddie Mac K-Series transaction, acquiring a subordinate interest—commonly referred to as the “B-piece.” The offering is now in its final stages of closing. In today’s cautious lending environment, this access to credit investments sets us apart.

Revere Housing

Through the establishment of Revere Housing, our latest initiative, we’ve returned to multifamily investing in San Francisco and other high-barrier urban markets. This strategy draws on our operational depth and market familiarity to navigate complex urban dynamics. Executed primarily through joint ventures and strategic partnerships, our initial investments demonstrate the ability to uncover value and position for near-term growth in highly selective markets.

Final Thoughts

The post-pandemic landscape—with elevated interest rates, inflation, and lingering oversupply—has presented real challenges. Yet the fundamentals of multifamily remain intact, and the current moment offers meaningful opportunity for firms with the capital, relationships, and conviction to act.

At Hamilton Zanze, we are not waiting for perfect conditions. We are leaning in—guided by data, driven by strategy, and grounded in experience.

Whether you’re an investor seeking stable, tax-advantaged multifamily opportunities or a broker or partner looking to align with an experienced, solutions-oriented sponsor, Hamilton Zanze is actively deploying capital, uncovering value, and operating with discipline across market cycles. We welcome the opportunity to explore how we can work together.

Kurt Houtkooper
CEO