CoStar Warns Multifamily Downturn Deeper Than Expected Article originally posted on Globe St. on November 13, 2025 Now is not the time for investors to relax about the state of the multifamily market, according to a new analysis from CoStar. On the surface, a growing demand for apartments might be enough to absorb the oversupply created by new construction in some markets and stimulate rent growth. The latest analysis, however, lowers those expectations and predicts that the vacancy will last longer than first forecast. “The updated forecast reflects a more cautious view of the market’s near-term performance. Average rent growth is now expected to turn negative, slipping from 0.6% in the third quarter to a projected -0.1% in the fourth quarter of 2025 — a downward revision of 160 basis points from last quarter’s forecast,” CoStar stated. Positives remain. For the first time in four years, renters are expected to occupy more space in 4Q 2025 than is added to supply. This factor – combined with a shrinking construction pipeline and strong demand — would allow overall vacancy to begin to drop in 2026. However, the drop would take longer than initially projected. The national vacancy rate would remain at 8.2% through the end of the year, before declining to 7.9% by the end of 2026. Until mid-2026, vacancy would continue to rise modestly until excess supply was absorbed. Rents would be affected by the weaker economy and will not improve until the supply is reduced. However, deliveries of new apartments are expected to slide by 28% in 2025 and an additional 55% in 2026, allowing demand to surpass supply within two years. Four and five-star apartments are likely to be protected, since absorption has already exceeded supply growth and there is strong demand for equivalent high-quality multifamily developments in the lease-up phase. Their average vacancy rate fell by 90 basis points from 11.9% toward the end of 2024 to 11% in 3Q 2025. And a further 30 basis points of decline by year-end 2025 is projected, as stabilized vacancy is expected to peak. But the recovery is not helped by the current tariff policy and a weakened labor market. “Lower immigration is expected to constrain the labor force and weigh on employment growth through 2030, reducing long-term demand for rentals,” CoStar stated. What this means for investors is that the future may hold only a modest drop in the vacancy rate over the next five years, along with rent growth averaging just 1.5% a year, below historical levels. “The balance of risks to the revised forecast remains tilted to the downside,” CoStar cautioned.