Strategic Opportunities Await Multifamily Investors

As we reach the latter half of 2025, it’s important to reflect on where the multifamily industry has been and where it’s headed. At the start of the year, we struck a bullish tone—anticipating monetary easing, an improved flow of apartment investment sales and operational upside.

While not all of our predictions have come to pass, our core conviction remains: this is a time to be bold, smart and deeply engaged in the multifamily market.

Strategic Optimism Based in Fundamentals

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

However, some headwinds have emerged: monetary policy has not loosened as much as anticipated, and we have yet to see the one to three rate cuts we hoped for in 2025. However, while the landscape has evolved in unexpected ways, smart multifamily investors and sponsors should continue to seek strategic opportunities to deploy capital this year and position themselves to capture projected upticks in operating fundamentals 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—and 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—also have impacted development economics. The apartment industry is closely 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, although both agencies remain essential pillars of multifamily finance. In response, strategic multifamily owners and sponsors have worked to broaden their lender relationships and remain adaptable.

Rent Growth and Operational Fundamentals

In the several years preceding 2025, a tidal wave of new apartment construction served to soften rent growth and increase vacancy rates in metros across the country. However, the delivery of new units is expected to decline significantly moving forward, due in part to tighter construction lending conditions—setting the stage for higher occupancy rates and stronger rent growth.

In fact, the delivery of new apartment units is expected to drop from a record of 613,514 in 2024 to 341,020 in 2027, a decrease of just more than 44%, according to Yardi Matrix. At the same time, the high cost of homeownership should help keep renter demand strong over the long term.

The significant reduction in new unit deliveries, anticipated to begin in the second half of 2026 and continue through the following two years, will create favorable conditions for the multifamily sector. With fewer new developments coming online, the existing apartment stock will experience higher absorption rates, boosting occupancy levels and driving rent growth.

Looking Ahead

The post-pandemic landscape—with elevated interest rates, inflation and lingering oversupply—has presented real challenges for apartment investors. Yet the fundamentals of multifamily remain intact, and the current moment offers a meaningful opportunity for investors with the capital, relationships and conviction to act. Sponsors and investors who are prepared to deploy capital strategically and adhere to disciplined underwriting standards can be well-positioned to take advantage of the upcoming improvement in property performance.

This outlook by CEO Kurt Houtkooper was originally published in Wealth Management’s 2025 Mid-Year Outlook.