We asked leaders in the multifamily industry to share their predictions for new development next year. Here is what they had to say:
Jason Lentz, SVP, Multifamily, Conor Commercial Real Estate
The outlook for multifamily development through the remainder of 2025 and into 2026 is one of cautious optimism. As markets absorb inventory, we anticipate a period of stabilization. With new deliveries trending below recent highs, several markets are poised to see demand outpace supply, leading to lower vacancy rates and renewed rent growth. These dynamics will create favorable conditions for the development of new multifamily communities.
In the Southwest region, there has been a shift toward suburban development, driven by the availability of larger sites that afford the opportunity to develop garden-style communities with surface parking, helping to keep costs down.
There is also a growing trend toward urban infill projects, especially in areas with higher barriers to entry. These developments typically feature elevator-serviced buildings, structured parking and lower unit counts due to site constraints. This shift reflects developers’ strategic response to capital availability and the desire to differentiate in competitive markets.
There is no reason to believe the Sun Belt will not continue to lead the nation in multifamily development, primarily due to continued job growth. Select Midwest markets are also seeing heightened activity. Markets such as Austin and Phoenix, however, are still working through a surplus of supply and may be less attractive in the near term. As excess inventory is absorbed over the next 12 to 18 months and rents stabilize and trend upward, these markets will see more development activity.
Brad Butler, Partner, Commercial Finance Practice Group/Co-Chair of Multifamily Housing Industry Sub-Team, Frost Brown Todd LLP
Interest rates will likely decline based on economic data, but the cuts won’t be significant due to the delayed inflationary effect of tariffs, which should keep financing costs steady.
Additionally, trade labor shortages will continue to make projects more expensive. As a result, new construction will slow, and light-rehab properties that are trading below replacement cost will become investors’ bread and butter over the next 12 months.
Garden-style apartment projects with 150 to 250 units and tax-exempt bond financing have become popular.
Additionally, the low cost of land in the Midwest has been a driver for low-rise apartment complexes that include several buildings and community amenities such as pools and playgrounds. I have seen many letters of intent for Columbus, Ohio, and Indianapolis, which are both experiencing strong economic growth.
Developer clients are avoiding markets with rent control laws at the state or local level, as these regulations cap exit valuations and make deals less attractive on the front end.
Tim Harris, SVP, Rosewood Property Company
Texas construction starts are at their lowest levels since before the pandemic. The rise in interest rates in 2023 made development screech to a halt. However, many affordable projects are moving forward due to their lower costs and rental rates.
The most active developers are focused on affordability or are experienced sponsors with a strong track record in supply-constrained submarkets. Projects with great locations, sponsorship, favorable cost basis and limited future competition will be the first to break ground.
High-cost projects, such as high rises, are proving difficult to get off the ground. Investors and developers are favoring smaller projects, which allow them to spread risk across two or three properties rather than committing to a single large investment. Additionally, developers are avoiding far-out suburbs, where builds happen fast and rental rates are more vulnerable to decline.
At Rosewood Property Company, we focus on luxury developments in high-growth areas with limited supply competition. Our builds are strategically located near employment centers, in desirable areas. The jobs in those areas support rental rates, and most people in our markets do not want a long commute.
