Rents Set to Rise as Landlords Regain Leverage

After a period of declining rents, the rental market is shifting back in favor of landlords, setting the stage for price increases nationwide.

Jordan B.
February 17, 2025

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Good morning. After a brief break, rising rents are making a comeback. With fewer new apartments on the way and high mortgage rates, landlords are regaining the upper hand—just as inflation concerns heat up again.

🎙️ No Cap hosts Alex Gornik and Jack Stone talk C-PACE financing with Robbie Pinkas, SVP at PACE Loan Group—breaking down how it funds energy-efficient upgrades and when it makes sense for real estate projects.

Market Snapshot

S&P 500

GSPC

6,114.63

Pct Chg:
-0.04%

FTSE NAREIT

FNER

782.92

Pct Chg:
-0.42%

10Y Treasury

TNX

4.478%

Pct Chg:
-0.044

SOFR

30-DAY AVERAGE

4.328

Pct Chg:
0.0%

*Data as of 02/14/2024 market close.

HIGHER RENTS

The Renter’s Market Is Fading—Get Ready for Higher Prices

With supply tightening and demand rising, the brief era of falling rents is ending—just as inflation remains a concern.

Big picture: A surge in apartment construction in 2023 and 2024 helped drive down rents, particularly in Sunbelt cities like Austin and Phoenix. But with mortgage rates high and new builds slowing, landlords are regaining leverage. According to CoStar, by late 2025, every major metro market is expected to see rent growth.

Inflation Nation: Higher rents could complicate the Federal Reserve’s efforts to curb inflation, as shelter costs make up about a third of the Consumer Price Index. January’s 4.4% annual increase in shelter costs was the slowest since 2022, but with rents projected to climb again, inflation may stay elevated—potentially delaying future interest rate cuts.

Between the lines: New housing supply could be further constrained by Trump administration policies, including migrant deportations and potential tariffs on Canadian and Mexican building materials. Undocumented workers make up 13% of the U.S. construction workforce, and Canada and Mexico supply roughly 25% of U.S. building materials—factors that could drive up construction costs and slow new development.

Rebound loading: Institutional investors are positioning for a rent recovery, with firms like Equity Residential and Gaia Real Estate acquiring properties in Sunbelt markets despite recent rent declines. Gaia, which exited the region years ago, has launched a new Sunbelt investment arm backed by Raymond James.

➥ THE TAKEAWAY

Zoom out: As demand rises and supply tightens, renters should expect a tougher market ahead. Meanwhile, rising costs and policy shifts could make affordability an even bigger challenge, drawing fresh attention to housing policy debates.

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✍️ Editor’s Picks

Slashing HUD: The US Department of Housing and Urban Development (HUD) plans to cut half its workforce as part of a broader federal downsizing effort.
Tax cuts: As parts of the 2017 Tax Cuts and Jobs Act (TCJA) near expiration, proposed tax modifications could significantly impact US CRE.
Newmark’s earnings: Fueled by strong capital markets and leasing activity, Newmark posted a 19% revenue jump in Q4 and projects 40% earnings growth by 2026.
Credit play: KKR closed its $850M Opportunistic Real Estate Credit Fund II, targeting senior loans and real estate securities across the U.S. and Western Europe.
Tariff impact: Construction material costs jumped 1.4% in January as contractors rushed to buy supplies ahead of new Trump-imposed tariffs on steel, aluminum, and imports.

🏘️ MULTIFAMILY

Fighting fraud: Fannie Mae has set aside $752M for credit losses in its multifamily lending business, citing fraud or suspected fraud as a contributing factor.
DTLA high-rise: Mack Real Estate and AECOM secured approval for a 51-story, 536-unit apartment tower in Downtown LA, part of a $1B urban village project.
JPMorgan bets on BTR: JPMorgan Chase partnered with Georgia Capital and Paran Homes to launch Laseter Development Group, targeting build-to-rent projects in the Southeast.
Suburban play: Laramar Group acquired a 294-unit apartment complex in Downers Grove, IL, for $72.1 million, betting on Chicago’s suburban multifamily market.
DFW deal: Harbor Group International acquired the 300-unit Livano Canyon Falls apartments in Northlake, TX, as the DFW rental market stabilizes after a supply surge.

🏭 Industrial

Savannah deal: LBA Logistics acquired a 491,329-square-foot industrial facility near the Port of Savannah for $46M.
AI data surge: Equinix and Digital Realty predict an "avalanche" of AI-driven data center demand, as cheaper AI training fuels corporate adoption and inference computing.
Active pipeline: Invesco Real Estate acquired a three-building, 261,950-square-foot light industrial portfolio in Rockland County, N.Y., for $63M.

🏬 RETAIL

Open-air heats up: Tanger acquired the 640,000-square-foot Pinecrest mixed-use center near Cleveland for $167 million, adding to its high-end retail portfolio.
Fridays’ reinvention: Under new leadership, TGI Fridays is shifting to a fully franchised model and exploring hotel partnerships to drive growth post-bankruptcy.

🏢 OFFICE

Back to work: Amazon’s five-day office return mandate boosted downtown Seattle foot traffic by 22% in key neighborhoods, fueling busier shops and a livelier streetscape.
In-N-Out: After 30 years in Irvine, In-N-Out is moving its corporate headquarters back to Baldwin Park and expanding east with a new 100K SF office in Tennessee.

🏨 HOSPITALITY

Hyatt's big bet: Hyatt is doubling down on all-inclusive resorts with its $2.6 billion acquisition of Playa Hotels & Resorts, aiming to capitalize on strong investor interest in the high-margin segment.