Multifamily housing reflects a tale of two distinct markets, with high-cost cities experiencing elevated construction costs that are limiting new supply, leading to higher rents, while other markets with more moderate construction costs are seeing a surge in development activity that is likely to put downward pressure on rents. This is according to Avison Young’s mid-year multifamily outlook, which pointed to core markets like San Francisco, New York and Los Angeles as examples of markets in the limited new supply category.
Southeast and Sun Belt markets like Atlanta, Denver, Charlotte and Austin, meanwhile, face flat and declining rents over the next several months. The report noted Miami is an exception, as it has maintained strong occupancy rates of around 95%, which will support steadier rent growth.
The report said the availability of multifamily housing will shape future demand. New supply has increased significantly across the United States, and high-quality living spaces with enhanced amenities have grown in popularity. About two-thirds of units currently under construction should complete this year, followed by considerably slower construction activity driven by cost uncertainties, said Avison Young. Southeast markets in particular are expected to adopt a wait-and-see approach to multifamily development.
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Increased multifamily demand is being driven in part by the high cost of homeownership combined with elevated interest rates, said the report. However, several factors could inhibit multifamily growth in the longer term. Many millennials are starting families and are less likely to remain in multifamily rentals long-term. In addition, location preferences may be impacted by return-to-office (RTO) mandates encouraging more people to return to physical workplaces, said the report. Some potential buyers and renters are likely to remain on the sidelines in response to ongoing tariff uncertainty and concerns about broader market conditions.
“For investors and developers, this suggests the need for a nuanced approach that considers shifting demographic trends, affordability challenges, and evolving lifestyle preferences when evaluating multifamily and residential rental investments,” said Avison Young U.S. multifamily and client data solutions lead Grant Hayes.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
