- 83% of multifamily investors are planning acquisitions in 2025, signaling growing optimism despite high interest rates and inflation.
- Debt costs remain the top constraint, with 93% of investors finding it hard to underwrite deals, despite plenty of available capital.
- The Southeast leads the nation as the most popular region for multifamily investors, with the Midwest gaining traction.
- Core-plus assets, value-add properties, and development opportunities are seen as top investments, with hopes for a more favorable market by 2026.
Despite rising interest rates and ongoing economic challenges, multifamily investors plan to buy more properties in 2025, according to a new survey by Berkadia.
Survey Says…
The survey, which polled 240 of Berkadia’s largest clients, revealed that 83% of multifamily investors are actively seeking deals this year, per Bisnow. This is a notable shift from the past two years when the market was frozen due to high debt costs and pricing uncertainty.
While only 2% of investors plan to reduce their portfolios, the overwhelming majority are optimistic about the market’s future. Capital markets are thawing, with more investors eager to capitalize on opportunities as they start navigating the “higher-for-longer” interest rate environment.
Hard to Underwrite
The main obstacle for investors remains the high cost of debt, with 93% of respondents reporting significant difficulty underwriting deals.
Nevertheless, capital is not in short supply, according to Ernie Katai, Berkadia’s head of production for mortgage banking. But, while capital is available, the key question remains: Are investors ready to jump back into the market?
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What is known is that more investors are targeting a mix of asset types. About 43% expect core-plus assets to outperform, while 30% see the greatest upside in value-add properties. Another 17% are focusing on development or opportunistic investments.
Interestingly, just 11% of investors expect core assets to perform the best, but that could change if debt costs ease.
Regional Sentiment Shifts
The Southeast remains the most favored region for investment, but the Midwest, once largely overlooked, is now gaining traction. The West and Central US are viewed as weaker markets.
Interest rates are a major concern, with over 20% of investors citing them as their biggest challenge. However, many are optimistic that the overall investment climate will improve in the second half of 2025 and expect a healthier multifamily market by 2026.
Limiting Factors
A key factor influencing investor decision-making this year will be US 10-year Treasury bond yields, which serve as a benchmark for debt pricing.
Recent slides in bond yields, driven by investor concerns about the economy, have created opportunities. If the yield drops below 4.25%, experts believe deal activity will pick up.
However, most investors remain cautious. Half expect the yield to stay between 4.0% and 4.5% through 2025, while fewer than 10% anticipate material rate relief. The Federal Reserve’s actions will play a key role, with most investors predicting only one rate cut in 2025.
In Summary
With roughly $600B in multifamily debt maturing in 2025, investors are closely watching the market for signs of improvement.
A narrowing gap between seller asks and buyer bids are easing market tensions, but many investors are waiting for better debt conditions before committing to deals, which they expect to see in 2026.
