Could 2025 Be the Inflection Point for Rent?

For much of 2024, commercial real estate headlines were dominated by fear. Office vacancies surged, refinancing risk made the “debt wall” the talk of Wall Street, and investors braced for the worst. But behind the noise, a different story is unfolding. After two years of volatility, early signals suggest multifamily is stabilizing and positioning for growth.

2025: Signs of Stabilization

• Vacancy Rates: National multifamily vacancy is expected to finish 2025 near 5%. That compares with a long-term average of 5.5% with peaks as high as 8% during the Global Financial Crisis. In other words, even after the record supply wave of 2023 and 2024, the market remains in healthy territory.

• Rent Growth: Rents are projected to grow about 2.2% nationally in 2025 (Freddie Mac), a sharp turnaround from negative rent growth in several Sun Belt metros in 2023 and 2024. For context, the pre-pandemic average was closer to 3%.

• Liquidity: Agency lending volumes are expected to rise to $370–380 billion, up from about $350 billion in 2024 — marking the first year of expansion since 2021.

In Texas, absorption is already outpacing new supply. Dallas–Fort Worth absorbed nearly 20,000 units in the last twelve months — the highest in the nation — while Houston’s vacancy rate has improved from nearly 9% in 2023 to closer to 7% by mid-2025.

2026–2027: Supply Cliff & Rent Acceleration

Developers have pulled back sharply. Multifamily starts are down nearly 60% from their 2022 peak. That means by 2026 and 2027, completions will fall while migration and job growth remain robust.

• Analysts expect rent growth of 4–5% annually in leading Sun Belt metros by 2027 — well above the national long-term average of 3%.

• Occupancy in Texas Triangle submarkets could tighten by 150–200 basis points, reversing the 2023–2024 softness when occupancy dropped by as much as 300 basis points in some markets.

• Expenses are also normalizing. Insurance and utilities, which spiked by double digits from 2020 to 2023, have begun to flatten — creating tailwinds for NOI margins.

2028–2030: Structural Expansion

By the end of the decade, multifamily demand will be driven less by cycles and more by structural realities.

• The United States faces a persistent housing shortage well through 2035.

• Mortgage rates will likely remain above 6%, far exceeding the 4.1% average between 2010 and 2020, keeping homeownership out of reach for many and steering demand toward rental housing.

• The Texas Triangle will absorb roughly half of U.S. population growth through 2030, adding millions of residents and reinforcing housing demand across Dallas–Fort Worth, Houston, Austin, and San Antonio.

The Steepest Part of the Curve

After multifamily rent accelerated in 2012, the Texas Triangle led an outsized rent-growth and value-creation cycle.

• When narrative-driven growth runs ahead of the data          

• When construction is historically constrained for one reason or another

• When fund vintages have tailwinds to outperform    

For multifamily, this means replacement costs are rising. Developers are competing directly with hyperscale tech firms for scarce land and power. Existing Class A assets with secure grid access will become more valuable, while new construction faces cost inflation and longer delivery times.

Texas exemplifies this paradox. AI and semiconductor projects are creating high-wage job growth that fuels rental demand, but they are also consuming the land and power that housing developers need. This imbalance creates a scarcity premium for existing multifamily properties.

Where Capital Is Likely to Flow Next

Texas Triangle Core

• Historical repositioning cycles in the Texas Triangle have produced NOI growth exceeding 100% over five-year horizons, demonstrating the structural advantage of value creation in temporarily supply-constrained MSAs.

Select Secondary Markets

• Secondary markets such as Denver and Nashville are also entering structural undersupply, with pipelines operating at 40–50% of pre-2020 levels.

Yield-to-Core Multifamily

• Assets where current use is generating yield today and offers potential for vertical redevelopment into future multifamily projects.

The New Performance Differentiator

Success in this environment won’t hinge on predicting interest rates— it will come from execution.

• As capital markets remain unsettled, performance dispersion will widen. Vertically integrated managers with direct operational control are stabilizing assets 30–40% faster and delivering an NOI growth 300–400 basis points above peers (MSCI, CBRE).

• At WRC, our research focuses on identifying these inflection points — where disciplined execution meets structural opportunity.

If 2023 and 2024 were defined by fear of oversupply, 2025 may mark the quiet beginning of scarcity — the condition from which every multifamily expansion cycle begins.