For the first time since 2021, tenants leased apartments faster than developers delivered new ones. The imbalance could be a boon for multifamily owners also set to benefit from the Trump administration’s trade policy tumult.
Nationally, about 95,000 units came online in the first quarter of 2025 and 102,000 were leased out of vacancy – that is, absorbed, according to Cushman & Wakefield data reported by Trepp’s Commercial Real Estate Direct.
It’s a trend expected to last. Record-breaking deliveries in 2024 are projected to fall off a cliff over the next two years.
Before Trump’s tariffs came into play, higher borrowing costs were already slowing new builds.
In the first quarter, the national construction pipeline reached lows not seen since 2018, according to C&W. 545,357 units were under construction, less than half of what was in the works two years ago.
Now, tariffs threaten to increase construction costs and, if inflation ticks higher, borrowing costs, which will likely slow development further.
“The noise of tariffs is going to create more disruption by virtue of the expectation that costs will rise,” Todd Henderson, head of Americas real estate for DWS, said.
“Capital will not flow to development, so I think we’ll see further deterioration of the development pipeline,” he added.
For multifamily owners who muscled through the 2022-2024 downturn, the supply-demand switchup is a blessing. Asset values dipped 20 to 30 percent as new deliveries outpaced demand, rent growth slipped, interest rates rose and cap rates expanded.
Now, the market has started to stabilize. The average national rent ticked up each month of the first quarter of 2025, according to Yardi Matrix. The January increase broke a six-month streak of declines.
Meanwhile, still-high mortgage rates are expected to keep would-be homebuyers on the sidelines, further pressuring supply as deliveries decline. All told: a perfect storm for multifamily values.
Buyers are already eyeing the shifting dynamics. Per a recent Berkadia survey, 83 percent of multifamily investors said they planned to make an acquisition in 2025, Bisnow recently reported.
That is, multifamily is — maybe — back, baby.