From Oversupply to Stabilization
The U.S. multifamily sector is navigating the late stages of a historic supply peak with surprising resilience. Through the first half of 2025, national rent performance and leasing activity appear more stable than anticipated, as robust absorption consumes much of the elevated new inventory coming online. Economist Jay Parsons points out that some of this absorption can be explained by wage growth, which has outpaced rent growth for 31 consecutive months. While rent growth remains modest, slowing new starts and steady demand are setting the stage for stronger rent fundamentals and reduced concessions heading into 2026.
Deliveries: New completions remain high but will taper during the second half of 2025 and beyond as starts decrease.
Occupancy: National occupancy averaging ~93.7%, with vacancy rates around 6.3%.
Rent Growth: Annual growth is forecast between 1.5%–2.2%, up from near-flat performance in 2024.
Concessions: Still common, particularly in oversupplied metros, but trending downward as absorption catches up.
Regional Market Highlights
Here’s how our target investment markets (markets where we own or are actively looking to buy) are performing in 2025:
Denver, CO
Denver is managing a steep new inventory pipeline, with annual inventory growth near 5% triggering a 3.3% year-over-year rent decline as of midyear. Vacancy hovers around 7% metro-wide, offset somewhat by strong leasing activity. With fewer future deliveries expected after 2025, pricing power is projected to slowly return by year-end. Property performance however is also impacted by the strong anti-landlord regulatory environment in Denver, which compounds the otherwise deleterious impact of excess supply.
Dallas–Fort Worth, TX
DFW remains the nation’s supply leader, but its strong absorption—particularly in suburban hotspots—is helping the market balance rapidly. Occupancy is forecast to hit 95% by Q4 2025, and rents are firming with an expected annual increase of 2–3.7%. Heavy use of concessions continues for lease-ups, but fundamentals are improving sharply.
Plano, TX
As one of DFW’s top-performing suburban nodes, Plano benefits from strong job and population growth. Occupancy is outperforming metro averages, rent growth mirrors DFW’s rebound, and tenant demand remains robust making it a standout submarket within the Sun Belt.
Burleson, TX
Burleson, an emerging suburb southwest of Fort Worth, follows overall DFW market dynamics with steady absorption and elevated concessions as it continues to process a high concentration of new supply. Fortunately, that new supply is tapering off in Burleson, leasing momentum is improving, and fundamentals are expected to strengthen later in 2025.
East Bay, CA
The East Bay is benefitting from strong demand in Class A assets and a manageable supply pipeline. Vacancy rates are lower than national averages and rent growth is turning slightly positive. With fewer concessions and consistent leasing from higher-income renters, East Bay continues to outperform adjacent urban markets like San Francisco and Oakland.
Orange County, CA
With occupancy consistently above 95% and limited new supply, Orange County remains one of the most stable U.S. rental markets. Rent growth is modest but positive, and concessions are far less common than in adjacent L.A. County, reflecting the region’s constrained land, job diversity, and supply discipline.
Portland, OR
Portland’s 2025 market reflects national patterns: a pause in new development, sustained absorption, and occupancy holding between 93–94%. While rent growth is flat to slightly positive, concessions remain prevalent in new lease-up deals but are expected to recede as supply normalizes through 2025.
Seattle, WA
Seattle enters 2025 with moderately elevated supply, but absorption is matching new deliveries, keeping vacancy steady at 6.3%. Urban core markets are offering concessions, but overall rent growth is turning positive, again supported by slowing new starts and durable renter demand that signal a stable outlook into 2026.
Investor Takeaways: Positioning for 2026
We believe an inflection point in multifamily is upon us. Markets that were under heavy stress from oversupply in 2023–24 are starting to stabilize. Incentives are still a leasing necessity in many markets but are starting to wane, which is a positive sign for revenue recovery and rent growth. We anticipate the return of rental pricing power in oversupplied markets starting later this year/early 2026 and continuing through at least 2028. As always, however, submarkets and a disciplined asset selection process matter. Supply constrained markets like the East Bay and Orange County should outperform. But opportunities to buy at meaningful discounts to replacement cost for newer product exist in Portland and Seattle. Portland benefits from continued political moderation and a new mayor and city attorney cleaning the streets up. Seattle is becoming appealing again as employers require workers to return to the office. On a recent visit there, our acquisition team was struck by the vibrancy of South Lake Union, resembling 2019 when we bought Alley 24.
We believe this inflection point coincides favorably with substantial unrealized gains held by funds nearing the end of their term as well as significant capital held by funds nearing the end of their investment periods which has yet to be deployed. Add to that the looming wall of loan maturities over the next several years and we anticipate strong buying opportunity in multifamily over the next several years.
We have recently purchased two stellar assets (Oxbow 49 in Portland, and Warehouse & Factory at Texas A&M) which prove out our thesis that real opportunities are out there for sponsors willing to expend the shoe leather and discipline while at the same time applying market research and vision for what an asset and submarket will be in the near, medium and long term.
