Multifamily REITs Demand Recovery Remains Key Amid 2026 Dip

Multifamily REITs project net operating income declines or modest gains for 2026, driven by rising expenses.
Supply is set to fall sharply, with deliveries down over 60% from the recent peak, boosting demand outlook.
High renewal and retention rates continue to support multifamily REITs despite sluggish rent growth.
Key players are adjusting by scaling back new development and reconsidering market focus.

Key Takeaways

Income Under Pressure

Multifamily REITs expect another difficult year as operating costs continue to outpace revenue growth, Bisnow reports. Rising expenses are pressuring income projections for 2026 and limiting earnings momentum across the sector.

Mid-America Apartment Communities (MAA), the largest REIT in the space, expects same-store net operating income to fall 0.75% this year. The company projects operating expenses will rise 2.7% while rent growth remains modest.

Other major players, including Equity Residential and AvalonBay Communities, are reporting similar trends. Equity Residential posted slower NOI growth in 2025 and now expects a further slowdown, while AvalonBay projects just 0.3% NOI growth for 2026, alongside rising expenses. AvalonBay’s development pipeline is also being slashed, with $800M planned for new projects—half the prior year’s total.

Supply Drops, Demand Holds

Despite lackluster income projections, multifamily REITs see reason for optimism: new apartment supply is dropping rapidly. MAA reports deliveries will fall more than 60% from recent highs, which executives believe will create a more favorable demand environment by late 2026. Camden Property Trust also highlighted improving rent-to-income ratios across their portfolio, further supporting apartment demand.

Lower supply could ease competitive pressure and help push renewal rates higher.
Camden estimates that residents spend only 19% of income on rent, underscoring continued affordability versus homeownership prices.

Geographical Shifts and Strategy

Facing regulatory headwinds and shifting demand, Camden is actively marketing its California properties, valued between $1.5B and $2B, to refocus on Sun Belt markets. The move underscores a broader strategy among multifamily REITs to prioritize regions with fewer legislative challenges and better growth prospects.

California-based Essex Property Trust also cited the shrinking supply as a positive factor and is scaling back new developments for 2026. The dynamic reflects a broader pattern across commercial property sectors, where rising operating costs have directly impacted NOI performance and, in turn, asset valuations. The REIT expects operating expense growth to slow as insurance costs normalize, which could provide some relief despite broader earnings pressure.

What’s Next

Looking ahead, multifamily REITs expect continued market bifurcation: challenged by high costs but supported by limited new construction and strong renter retention. How quickly standing inventory is absorbed—and whether broader job growth rebounds—will be critical to reversing this year’s income declines.