Multifamily Demand Booms Amid Construction Pullback

A Demand Surge Meets A Construction Slowdown

The US multifamily sector is showing remarkable resilience, as reported by GlobeSt. More than 116K units were absorbed in Q2 2025—marking one of the strongest quarters in a quarter-century. Year-to-date absorption totals 216K units, closely tracking last year’s near-record pace.

But even as demand strengthens, the development pipeline is slowing. Nationwide, fewer than 500K multifamily units are under construction—the lowest level since 2016. Cushman & Wakefield’s Q2 report highlights that net absorption has now outpaced new deliveries for two consecutive quarters.

Financing Strains And Pipeline Pullbacks

Construction starts have slowed drastically amid persistent financing difficulties. Currently, under-construction units make up just 3.8% of total inventory, less than half the peak seen in 2023. Only 11 US markets reported any pipeline growth over the past year.

Markets experiencing the sharpest pipeline drops include:

• Dallas/Fort Worth: Down 22K units
  
• New York and Austin: Down ~18K units each
  
• Phoenix, Atlanta, Houston, Washington, DC: Down over 10K units each

Rents Cool, But Occupancy Improves

As economic uncertainty and softening consumer sentiment weigh on the market, operators are shifting focus from rent growth to maintaining occupancy.

• Rent growth: Slowed to 1.7% year-over-year, the steepest pullback since 2023
  
• Occupancy rate: Up 20 basis points year-to-date
  
• Vacancy: Still 200 bps above the long-run average, but posted its first sequential decline since 2021
  

While overall demand remains strong historically, seasonally adjusted absorption was softer than usual, rising only half as much as the typical 30% second-quarter increase.

Gateway Markets Shine

Despite national headwinds, major metro areas are outperforming:

• San Francisco: Nation-leading 6.8% rent growth
  
• San Jose and Chicago: Each at 4.5%
  
• New York and Northern New Jersey: Over 3.5% rent growth
  

These gateway cities are benefiting from limited housing supply and renewed urban migration trends. According to Cushman & Wakefield, these markets are expected to continue outperforming with sustained rent growth and low vacancy.

What’s Next

With construction activity unlikely to rebound quickly, the supply-demand imbalance could widen further—especially in top-performing urban markets. While affordability pressures and macroeconomic headwinds could temper future rent growth, solid fundamentals point to continued strength in the multifamily sector through the end of 2025.