Multifamily Rent Growth Outlook: Construction Drop Extends Runway

By RadCRE Research · 2026-10-24 · Industry Insights

With apartment construction down 50% from peak levels, constrained supply and rising transaction volume point to an extended rent growth cycle.

Supply Contraction Clears Path for Extended Rent Growth

The macroeconomic environment for commercial real estate is undergoing a structural realignment as new construction slows dramatically. Across the national multifamily sector, apartment construction has plummeted by 50% from its peak in 2023, according to John Chang, chief intelligence and analytics officer for Marcus & Millichap [3]. Elevated development costs continue to keep prospective development projects on hold, effectively pushing the next wave of competing apartment supply years into the future [3].

This sharp pullback in development activity provides existing asset owners with an extended runway for sustained rent growth [3]. In previous cycles, rapid supply deliveries often dampened pricing power in high-growth metros. However, with deliveries curtailed, even markets experiencing moderate demand growth are becoming increasingly attractive to institutional investors seeking durable cash flow [3]. Underwriting criteria are shifting decisively toward core market selection metrics, specifically job creation, population gains, and corporate business expansion [3].

Capital Liquidity Rebounds in Major Metros

As supply pressures ease, investor sentiment has begun to rebound across key gateway and metropolitan markets. In Los Angeles County, multifamily transaction activity has experienced a sharp revival. Sales volume for multifamily assets with 50 or more units reached $3.3 billion through the first nine months of the year, marking a 44% increase compared to the same period in the prior year, according to Colliers data reported by Commercial Observer [6].

The rebound in deal activity follows a strong performance in 2025, when multifamily established itself as Los Angeles County's strongest investment sales sector [6]. While total transaction dollar volume has expanded significantly, pricing adjustments have facilitated capital deployment. The average sale price across the county settled at $357,085 per unit [6], presenting repriced entry points for institutional buyers and syndicators navigating current debt yields.

RadCRE Perspective

The convergence of suppressed pipeline starts and rebounding transaction volume signals a distinct transition point in the multifamily cycle. As construction starts remain suppressed nationwide, existing apartment properties are well-positioned to capture pricing power as occupancy stabilizes.

"With nationwide apartment construction cut in half from its 2023 peak, the threat of incoming supply overhang is fading rapidly," says Majid Radaei, Founder and Principal Broker of RadCRE. "We are seeing institutional capital re-enter high-barrier markets like Los Angeles with a 44% surge in transaction volume. For sponsors underwriting acquisitions today, the moderation in pricing to $357,085 per unit, combined with an extended rent growth runway, creates one of the most compelling risk-adjusted entry windows of this cycle."

Market Underwriting Implications

For lenders, equity partners, and acquisition teams, the supply cliff shifts strategic focus away from defensive concession management toward aggressive top-line forecasting for 2027 and beyond. Because development costs remain restrictive, new groundbreaking activity is not anticipated to recover quickly [3]. Consequently, existing multifamily inventory in markets exhibiting steady employment fundamentals and net population growth will likely experience accelerating pricing power as supply-demand equilibrium tightens further over the multi-year forecast horizon [3].

Tags: multifamily market analysis, apartment rent growth forecasts, CRE construction slowdown, commercial real estate underwriting