The multifamily real estate market is on the cusp of a significant turnaround. According to recent research from CBRE, markets that have experienced high supply and negative rent growth are set to rebound by mid-2025. This optimistic outlook is driven by stabilizing occupancy rates and increasing renter demand, which are absorbing much of the new supply.

Positive Trends on the Horizon

CBRE’s latest findings indicate that the negative rent growth trend is expected to reverse as demand begins to outpace supply. This positive shift is already visible in downtown submarkets of cities like Atlanta, Austin, Orlando, and Phoenix. Nearly all high-supply markets with negative rent growth are predicted to see positive growth and stable vacancy rates by mid-2025, with Austin being a slight exception due to a substantial increase in new suburban supply.

Economic Factors Supporting Recovery

The overall property values have shown signs of stabilization, and capitalization rates are expected to fall following the Federal Reserve’s recent interest rate cuts. On September 18, the Federal Reserve Open Market Committee reduced interest rates for the first time in four years, driven by a softening labor market and cooling inflation. This 50-basis-point rate cut is expected to further bolster the multifamily market’s recovery.

A Brighter Future for Multifamily Markets

As higher occupancy rates lead to rent growth, property values are anticipated to climb, even in markets currently facing high supply and negative rent growth. These markets are poised to lead the recovery in property values ahead of the overall market.

Matt Vance, Americas head of multifamily research for CBRE, expressed optimism about the future: “As demand outpaces new supply and occupancy rates stabilize, we are seeing a brighter light at the end of the tunnel for multifamily markets with high supply and negative rent growth. Positive growth and increased property values are on the horizon.”

The multifamily real estate market is gearing up for a promising recovery, offering a beacon of hope for investors and stakeholders alike. Stay tuned as we continue to monitor these encouraging trends and their impact on the broader real estate landscape.