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By Valerija I. via CRE Daily – Click here for complete article and other similar stories from them.

Multifamily investment cooled in Q2, but record absorption, strong regional performance, and healthy investor appetite underscore the sector’s resilience.

Multifamily on top: Multifamily sales totaled $35.1B in Q2, down 14.4% YoY, a dip skewed by AIR Communities’ $10B privatization in mid-2024. Still, first-half 2025 volume edged up 5.3%, and trailing 12-month sales jumped 24.4%, keeping multifamily the top asset class with a 33.4% market share, well above its long-term average.

Regional leaders: The Sun Belt claimed 48.9% of 12-month activity, driven by heavy pipelines in Dallas, Austin, and Phoenix. The Midwest rose to 11.5%, nearly 300 bps above its norm, as investors sought stability in Columbus and Milwaukee. Dallas led with $5.6B in first-half sales, while Seattle and Portland each jumped 75%+ YoY.

Record demand, tight supply: Apartment demand hit a record with 227K units absorbed in Q2 and 794K annually—11% above the post-COVID peak. Supply is slowing, with completions down to 108.7K units, nearly one-third below 2024’s high. The imbalance pushed vacancy to 4.3%, the lowest in 11 quarters, especially tight in the Northeast and Midwest.

Flat rents: Despite strong demand and lower vacancies, rent growth stalled at 0.8% YoY—the first time both metrics hit top-quartile levels while growth stayed under 1%. Gains were led by supply-constrained markets like San Francisco, Chicago, and New York, while much of the Sun Belt saw declines.

Signs of strength: Debt originations jumped 43% YoY in 1H 2025 as spreads narrowed and construction slowed, though banks pulled back, giving ground to debt funds, insurers, and CMBS lenders. Apartments delivered a 5.13% annualized Q2 return, beating the all-property index by 90 bps and extending their track record of outperformance.

➥ THE TAKEAWAY

Resilience through shifts: Even with softer transaction volume, multifamily fundamentals remain strong: record demand, tighter vacancies, and shifting capital point to resilience. As supply cools, rent growth may finally pick up in late 2025, rewarding patient investors.