- Multifamily accounted for the largest share of total commercial real estate (CRE) investment in Q1 2025, reaching $28.8B—a 33% year-over-year increase.
- The national vacancy rate fell sharply to 4.8%, with net absorption jumping 77% to 100,600 units, the highest quarterly total since 2000.
- Supply shortages and growing demand fueled rent increases, particularly in Midwest, Northeast, and Pacific markets, with average monthly rents rising 0.9% to $2,184.
Multifamily Sees Strongest Q1 Investment Since 2022
According to Globe St, a new report from CBRE highlights a strengthening multifamily investment in early 2025. Improved supply-demand dynamics led to a 33% year-over-year increase in investment volume, reaching $28.8B—the largest share of total CRE investment and the strongest first-quarter performance since 2022.
Demand significantly outpaced supply, with a national vacancy rate dropping to 4.8%. Net absorption climbed 77% year-over-year to 100,600 units, signaling the sector’s strongest quarter in 25 years. Meanwhile, 71,000 new units were completed, marking a notable drop from the 120,000 delivered in Q4 2024.
Strong Absorption Across Key Markets
Positive net absorption was widespread, occurring in 63 of the 69 markets tracked by CBRE. New York, Atlanta, and Phoenix led the way, while Sunbelt markets like Austin, Jacksonville, and Raleigh posted the highest absorption rates relative to inventory.
Across the 20 markets with the most new supply, absorption exceeded completions, accounting for two-thirds of total national absorption. Markets such as Chicago, Tampa, and Atlanta also posted more absorption than supply, signaling broad-based strength.
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Vacancy and Rent Trends Suggest Further Growth
The national vacancy rate’s 20 basis point plunge was the largest first-quarter drop on record, a trend seen in 47 metro areas. Class A, B, and C properties all saw vacancy declines, with respective rates of 5.1% and 4.7%.
Rents rose 0.9% quarter-over-quarter to an average of $2,184, with the Midwest leading regional rent growth at 3.3% annually. The number of markets experiencing annual rent declines dropped from 28 to 19, although some Mountain region cities, such as Austin and Denver, still posted negative rent growth.
Investment Momentum Poised to Continue
Investment activity remained strong, with rolling four-quarter multifamily volume rising 4.9% to $154B. Cap rates ticked slightly lower between Q4 2024 and Q1 2025.
New York, Dallas-Fort Worth, and Los Angeles led the nation in rolling four-quarter investment volumes. Gateway markets overall saw a 48% annual jump in multifamily investment, underscoring renewed investor confidence.
Despite broader economic uncertainty, CBRE’s head of multifamily capital markets, Kelli Carhart, said the sector is “poised to remain resilient” heading into the rest of 2025.
