Multifamily Buyer & Seller Confidence Ticks Up Despite Policy Uncertainty

Developers who built during the 2023–2024 boom now benefit from completing projects before a fresh round of tariffs drives up material costs.

Jordan B.
April 17, 2025

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Good morning. Q1 brought a notable shift in multifamily sentiment, with buyers and sellers aligning more closely, particularly around core investments. Underwriting assumptions remained stable, hinting at cautious optimism ahead.

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Market Snapshot

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*Data as of 04/16/2024 market close.

CONFIDENCE BOOST

Multifamily Buyer & Seller Confidence Ticks Up Despite Policy Uncertainty

Investor confidence in multifamily edged higher in Q125, as underwriting metrics stabilized—especially for core assets—even with rate-cut delays and looming policy shifts.

Signs of recovery: Core multifamily underwriting improved in Q125. CBRE reports going-in cap rates for core assets dropped 6 bps to 4.83%, while exit cap rates dipped to 5.00%. The average unlevered IRR target also fell to 7.58%, realigning with mid-2023 levels. Notably, the spread between going-in and exit cap rates widened to 19 bps—an indicator expected to persist as interest rates gradually ease.

Sentiment shifts: Buyer confidence in core multifamily surged, with 65% expressing positive sentiment, up sharply from 44% last quarter. Seller sentiment also became less bearish, with a shift toward neutrality. Value-add sentiment improved modestly, but remained more mixed.

Muted value-add outlook: Unlike core assets, value-add investments saw slightly weaker fundamentals. Going-in cap rates rose by 7 bps to 5.32%, while exit cap rates ticked up to 5.42%. The spread between these compressed for the second consecutive quarter, while IRR targets rose slightly to 9.81%, reflecting heightened investor caution.

Assumptions hold steady: Annual rent growth expectations over the next three years held firm at 2.7% for core and 3.1% for value-add assets. This stability suggests investors believe the market is regaining footing after a historic supply surge, even as new deliveries continue to hit the market.

Market movements: Cap rate compression occurred in seven of 19 markets, including Atlanta, Chicago, and Los Angeles, with Indianapolis being the only market that increased. In the value-add segment, Austin and Miami experienced declining cap rates, while four markets reported increases, indicating localized shifts in perceived asset risk.

➥ THE TAKEAWAY

Looking ahead: Investor optimism is cautiously returning to multifamily—especially on the core side—as underwriting stabilizes and rent assumptions hold. While value-add still faces headwinds, the overall tone of CBRE’s Q1 report hints at improving deal flow and more active capital placement as the year unfolds.

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✍️ Editor’s Picks

Energy efficiency incentives: While the Inflation Reduction act supercharged Section 179D, offering bigger tax incentives for energy-efficient buildings, political hurdles could pose a challenge in the future. (sponsored)
Selling Snowbirds: Political tensions and a weak Canadian dollar are prompting Canadians to offload US vacation homes in droves, with concerns over tariffs, property rules, and rising hostility driving decades-long owners to cash out.
Orlando's tourism: Universal’s new 750-acre Epic Universe theme park is projected to generate $2B for Florida and over 17,500 new jobs in its first year, marking the biggest U.S. theme park debut in 25 years.
Rich revival: San Francisco’s ultra-wealthy are snapping up deeply discounted commercial real estate, betting on a high-risk, high-reward urban comeback fueled by AI optimism and civic pride.
Stadium comeback: Washington, D.C. is close to sealing a $3B deal with the Commanders to redevelop the RFK Stadium site into a new NFL stadium and mixed-use hub, aiming for kickoff by 2030.

🏘️ MULTIFAMILY

Renter surge: Renters accounted for over half of US household growth in 2024, as affordability challenges, lifestyle preferences, and new supply kept rental demand strong.
Conversion opportunity: Slate Property Group’s David Schwartz sees opportunity in conversions and housing awareness, but warns high borrowing costs and local resistance still threaten affordable development in NYC.
Board shakeup: Fannie Mae is getting a political jolt as Trump ally and anti-ESG investor Omeed Malik joins the board, signaling a sharp rightward shift in housing policy leadership.
Riverfront reboot: Biddle Real Estate, King Street Capital, and PCD Development just locked in $237.5M to refinance their ambitious Hudson River projects in Sleepy Hollow.
Conversion kickoff: Duball has broken ground on its $100M office-to-resi conversion in Dupont Circle, boosted by a rare DC tax abatement.

🏭 Industrial

Supply slump: South Atlanta’s industrial market saw new supply plummet to just 100 KSF in Q125—its lowest in a decade—as vacancy rose and rents showed mixed movement.
Industrial upgrade: RMR Group plans to convert a former office site near Philadelphia International Airport into a 477.5 KSF industrial facility, capitalizing on rising air cargo and distribution demand along the I-95 corridor.
Capital refresh: Seagis Property Group secured $184.2M in financing to refinance two fully leased industrial portfolios spanning 1.5 MSF across Miami-Dade and Northern New Jersey.
Scaled reset: The long-delayed Brooklyn Village redevelopment in Charlotte has been significantly downsized, with developers now scrapping market-rate units in favor of 250 affordable apartments and reduced retail.

🏬 RETAIL

Retail evolution: Five years after the COVID-19 lockdowns disrupted US retail, physical stores have not only recovered but thrived, reshaping consumer habits and proving brick-and-mortar’s staying power.
Asset unload: Mall landlord WPG is selling off its remaining portfolio and laying off 139 employees as it winds down operations, marking the final chapter in a years-long post-bankruptcy selloff.
Mall meltdown: A state judge has granted Wilmington Trust summary judgment in its foreclosure case against Palisades Center, pushing the 2.2 MSF NY mall closer to a potential dismantling and piecemeal sale.
Supermarket appeal: Out-of-state investors Sterling Organization and Phillips Edison & Co. shelled out nearly $89M for two Safeway-anchored East Bay shopping centers.

🏢 OFFICE

Anchor tenant: JPMorgan Chase will anchor a new 170 KSF office project in Fort Worth’s Crescent development, doubling its local footprint and reinforcing the area’s emergence as a financial hub.
Discount deal: The Prebys Foundation has acquired San Diego’s Wells Fargo Plaza for $40M—$108 million below its 2004 sale price.

🏨 HOSPITALITY

Booking breach: Fontainebleau Miami Beach is suing three South Florida brokerages for allegedly skirting its exclusive condo-hotel rental program by facilitating unauthorized Airbnb-style bookings at its Trésor and Sorrento towers.

A MESSAGE FROM HARVARD

Engage with Industry Experts on Real Estate's Future

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📈 CHART OF THE DAY

U.S. apartment rents are making a slow comeback, with year-over-year growth hitting 1.1% in March 2025—the highest since mid-2023—as demand begins to close the gap with supply.