Multifamily fundamentals in 2025 were shaped by resilient demand working through a historic supply peak, resulting in elevated vacancy and muted rent growth rather than a deterioration in underlying market health.
Key Takeaways
Apartment demand remained resilient in 2025, with net absorption totaling 355,000 units, the third-strongest year in 25 years, despite a typical seasonal slowdown in Q4.
New supply broadly matched demand, with 400,000 units delivered (down 26% YoY), keeping vacancy elevated at 9.3%, while a 50% pullback in the construction pipeline points to stabilizing fundamentals in 2026.
Rent growth decelerated meaningfully, with national asking rents up just 1.1% YoY, as elevated concessions persisted in markets still absorbing recent supply.
Resilient Apartment Demand, Supply-Driven in 2025
Apartment demand softened modestly in Q4 2025 due to typical seasonality and a slowdown in new construction rather than weakening renter fundamentals, with net absorption remaining positive and full-year demand reaching ~355,000 units—the third-highest level in 25 years. A surge in new deliveries expanded choice and improved affordability, while constraints in the for-sale market kept renters in place longer, causing absorption to track closely with supply and leaving vacancy elevated in many high-growth markets. Percentage demand gains were led by Huntsville (8.8%), Sarasota (8.7%), Charleston (7.9%), Austin (7.8%), and Charlotte (7.4%), with Boise the only top-10 market maintaining single-digit vacancy, while nominal absorption was highest in New York City (~27,000 units), Dallas–Fort Worth (~25,000), Austin (~20,000), Atlanta (~19,000), and Phoenix (~15,000).
Vacancy Stabilization Emerges as Supply Pressures Recede
National apartment vacancy edged higher in the second half of 2025, ending the year at 9.3%—flat year over year but 20 bps above midyear levels—as stabilized vacancy rose amid aggressive concessions tied to recent deliveries. These incentives proved most effective at the top of the market, with Class A vacancy improving to its lowest level since late 2023, while Class B and C occupancy softened as renters traded up into newer products. Regionally, vacancy expanded modestly across most markets, with the Sunbelt a notable exception, posting a 10-bp YoY decline as construction pipelines thinned. The sharpest improvements occurred in former supply-heavy markets, led by Boise (-350 bps) and Charleston (-260 bps), followed by Spokane (-220 bps), while Austin, Jacksonville, and Greenville each posted roughly 170 bps declines, signaling improving balance as excess supply is absorbed.
Rent Growth Moderated Sharply in 2025
Rent growth decelerated sharply in 2025, with national asking rents up just 1.1% YoY, roughly 100 bps below 2024 levels and marking the weakest annual increase since the pandemic, as elevated near-term supply and cooling labor conditions weighed on owner confidence. While flat fundamentals and rising vacancy echoed late-2024 conditions, the key shift in 2025 was growing concern about the durability of renter demand rather than unit availability alone. Rent pressure was most acute in the Sunbelt (0.1%) and West (0.5%), where recent deliveries intensified competition, though performance diverged at the market level: the San Francisco Bay Area continued to recover on the back of AI-driven investment and improving leasing, led by San Francisco (7.5% YoY) and San Jose (>4% YoY) rent growth.
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Outlook
Many demand-side risks have already been absorbed, as apartment fundamentals adjusted over the past year to a softer macro backdrop marked by slower job growth, normalizing household formation, and reduced net immigration—yet 2025 still delivered the third-strongest year for apartment demand in 25 years, underscoring the resilience of renter household formation. While these dynamics temper long-term growth expectations, near-term conditions are increasingly shaped by supply: the construction pipeline has fallen to its lowest level since 2015, signaling a sharp decline in new deliveries ahead. With demand holding firm and supply pressures easing, apartment fundamentals are positioned for a gradual improvement in rents and occupancy over the next several years, even if a full return to pre-pandemic norms remains unlikely in the near term.
