Multifamily players spot recovery signs amid risks and headwinds

The multifamily sector faced harsh headwinds over the last couple of years, including stagnant rents and high vacancy rates. A new analysis paints an outlook of cautious optimism, although risks remain. 

NAIOP’s Spring 2026 CRE Sentiment Index indicates that commercial real estate leaders expect conditions to slightly improve over the next 12 months. Multifamily developers are no exception, NAIOP President and CEO Marc Selvitelli told HousingWire’s The Builder’s Daily.

“It wasn’t all that long ago that we were largely in the trough when it came to multifamily, but I think we’re starting to see that change,” Selvitelli said. 

Where multifamily rents are headed

There are a couple of reasons for measured optimism, Sevitelli said. First, a surge of development earlier in the decade brought a wave of new supply to the market, contributing to downward pressure on rents and occupancy. 

Selvitelli said that a growing number of property developers, owners and managers sense that the multifamily market has begun to absorb this supply and that rents will tick up over the next year. Yardi forecasts a 1.2% increase in advertised rent growth nationally for 2026 and 2.0% for 2027. 

Still, high vacancy rates remain a challenge, as rates of occupancy fell 0.5% annually in February to 94.5%. Additionally, U.S. Census Bureau data released on Tuesday found that the rental vacancy rate increased to 7.3%, up 20 basis points from a year ago. 

Multifamily development skyrocketed in the immediate aftermath of the COVID pandemic, largely due to low borrowing costs and the rising cost of homeownership. Multifamily housing starts peaked in 2022, before bottoming out in early 2024. This surge in development pressured both rents and occupancy rates.

Starts have picked up since then, injecting a healthy level of new supply into the market, but construction still hasn’t recovered to the levels seen three years ago. 

Similar to the single-family market, the surge in multifamily development was overwhelmingly concentrated in rapidly growing Sun Belt cities, leading to an oversupply of new units and negative rent growth in those markets. 

The latest Yardi Matrix Multifamily National Report found that multifamily rents grew slightly in March, with year-over-year growth coming in at just 0.1% last month. Over the past two years, rents increased just 1.68% nationally. 

While this growth was slow and well below the historical annual March growth rate of 3.6% between 2012 and 2019, this marks the first time that multifamily rents rose since last summer, indicating some positive momentum. 

Rental growth varies greatly depending on the geographic area. All of the top ten markets for annual rent growth, led by New York, San Francisco, Chicago, Minneapolis and Kansas City, are located in the Northeast, Midwest or West. Conversely, markets with the greatest decrease in rents, led by Austin, Denver, Tampa, Phoenix and Orlando, are overwhelmingly concentrated in the Sun Belt. 

However, there are indications that certain Sun Belt markets may be turning a corner. Austin, for example, posted the weakest annual rent growth, but experienced the second-largest monthly increase in rents from February to March.

Cautious optimism abounds, but uncertainty remains

Construction slowed in part because capital markets tightened. Interest rates increased, construction costs ticked up and rent growth stagnated, making it difficult for projects to pencil.

Sevitlli said that he is seeing the capital markets open back up for multifamily projects, but economic volatility has caused some hesitancy. 

“There are still some reservations. If you asked me this question six months ago, I’d have said the capital markets look even better than they do today, but that’s largely, in my opinion, more indicative of geopolitical risk right now than anything else,” he explained. 

The CRE Sentiment Index additionally found that commercial real estate professionals, including multifamily developers, expect construction costs to rise more rapidly over the next year. 

“I think that’s reflective of the geopolitical risk that’s out there. The rising fuel costs certainly add to the tab of transporting any of the goods needed to build a multifamily project,” Selvitelli said. 

The Yardi Matrix report also noted the risks that the war in Iran presents to multifamily developers. 

“If the conflict persists, elevated energy prices could place sustained pressure on household formation. Affordability pressures are already elevated, and higher energy costs—particularly at the pump—erode discretionary income and disproportionately impact lower-income households, further limiting renters’ ability to absorb rising housing costs,” the report read. 

In Sevitelli’s view, while the overall direction is positive, external factors beyond developers’ control remain the biggest uncertainty. Regardless of how geopolitical risks unfold, the pace of recovery will likely be slow. 

“When you drill down into multifamily, I think that there’s cautious optimism that we’re going to see some increase in rent growth and maybe a little bit in occupancy rates, but I wouldn’t say that it is a boom scenario we’re looking at right now either,” he said.