Navigating Multifamily Demand, Tariffs, and Market Shifts

As of April 21, 2025, the multifamily real estate sector is navigating a complex landscape shaped by robust rental demand, rising construction costs due to tariffs, and economic uncertainties. 

Strong Rental Demand Amid Economic Headwinds 

Despite economic challenges, demand for multifamily housing remains resilient. In the first quarter of 2025, over 138,000 units were absorbed—the highest ever for a first quarter—with nearly 460,000 units projected to be absorbed throughout the year.  

Tariffs Impacting Construction Costs and Supply 

Recent tariffs, including a 25% levy on steel and aluminum, are increasing construction costs, particularly for mid- and high-rise multifamily projects. This has led to a slowdown in new construction, with developers facing higher expenses and potential project delays.  

Investor Sentiment and Multifamily Market Outlook 

The combination of strong rental demand and constrained supply presents opportunities for investors. However, uncertainties related to tariffs and economic policies are affecting investor confidence. Blackstone has noted that tariffs and inflation have "dramatically impacted investor sentiment," emphasizing the need for patience and adaptability in the current market. 

Regional Market Considerations 

While Texas and Florida continue to be significant markets in multifamily investments for us, other regions are emerging as attractive alternatives for others. Cities like Chicago, San Diego, and Columbus offer favorable conditions, including strong job markets and relative affordability, making them appealing for multifamily development.  

Conclusion 

The multifamily real estate market in 2025 is characterized by strong demand and challenges related to construction costs and economic policies. Investors should remain vigilant, adapting strategies to navigate the evolving landscape and capitalize on emerging opportunities. 

Sources:

Business Insider

CRE Daily

GlobeSt Newsweek

Multi-Housing News

Yardi Matrix

Berkadia