As we head into 2026, the multifamily market remains in a transitional period marked by continued uncertainty on the capital side and heightened operational challenges.
While debt is available—albeit at a higher cost—equity remains on the sidelines, cautious and opportunistic. That lack of equity participation is slowing development, especially as rents remain under pressure due to an elevated supply pipeline and tough competition. We’re seeing downward pressure on rents—not from weakened fundamentals, but due to seasonality returning post-COVID.
From a regional standpoint, the Southeast and Southwest are facing oversupply challenges. In some metros, absorption is running 25% below new deliveries. Until we see occupancy improve, we’ll know that excess inventory hasn’t been fully absorbed. Operationally, we’re advising clients to shift their strategies—go unit by unit, optimize pricing, and improve market-specific marketing efforts.
A trend to watch next year will be the share of renters lost to homeownership. Historically, the share has been around 20%. However, given elevated interest rates and affordability challenges, public REITs are reporting under 10%. There will not be a big, dramatic shift overnight, but I think we will begin to see that share increase as rates come down and builders continue to move their QMIs.
The acquisition side is equally complex. There’s interest in light value-add plays. There’s distress in the market, but it’s often in unstabilized assets—hard to finance and harder to execute on.
Urban cores may see some bright spots. Wrap and podium projects are faring better, with fewer lease-ups competing. In contrast, suburban areas, particularly in places like Phoenix and Austin, are densely developed. Austin faces ongoing challenges and will be notable in 2026.
In the BTR space, we’re seeing nuanced renter profiles. Townhomes are underperforming compared to detached product. Builders chasing density and easier entitlements have flooded the market with them, but it’s not always driven by demand.
2026 will be a year where operational excellence, strategic creativity, and local market intelligence define success.
