The Wilkinson Multifamily Investing team is optimistic that through our disciplined approach to sourcing new acquisition opportunities, our clients will continue to prosper, building upon our three decades-long track record of success delivering remarkable results. 

Here we will review:

• Commercial Real Estate Outlook for 2025

• Multifamily Market Outlook for 2025

• Political and Economic Impacts

• Wilkinson Target Market Outlook for 2025

• Wilkinson Strategic Positioning for 2025
  
  

Commercial Real Estate Outlook For 2025

Rent Growth

The CRE market, encompassing sectors such as office, retail, industrial, and multifamily, is expected to experience modest rent growth in 2025. Industrial and logistics properties are likely to see rent growth of 2% to 3%, fueled by sustained demand for warehouse space driven by e-commerce and supply chain efficiencies. In contrast, office and retail sectors will experience minimal growth. The office market remains constrained by remote and hybrid work trends, while retail growth will be concentrated in experiential and convenience-focused properties.

In the multifamily sector, apartment demand has surged, with 2024 seeing the highest annual demand in nearly three years—666,699 units. This significantly outpaced the annual supply of 588,883 units. Momentum is expected to carry into 2025, with rent growth projected at 2.6% as demand continues to exceed new supply. The declining pace of new construction, forecasted to decrease by 15.2% in 2025, is a key factor driving these dynamics.

Occupancy Growth

Occupancy levels are anticipated to remain stable overall, though with variations across sectors. The industrial sector is expected to maintain high occupancy rates due to strong demand, while the office sector faces lingering challenges as companies reassess their space needs, keeping demand below pre-pandemic levels. The retail sector, however, may benefit from increased occupancy in experiential and last-mile retail locations despite e-commerce pressures.

National multifamily vacancy rates are expected to stabilize at around 6.0% in 2025, following a slight decrease from the peak of 6.25% in 2024. Fannie Mae projects that this stabilization will be driven by a balance between new deliveries and absorptions, with demand remaining strong in many markets.

New Deliveries and Absorption

Balancing new construction and absorption will be a critical factor in maintaining stability. Industrial developments will prioritize last-mile distribution centers in high-demand areas, while new projects in the office and retail sectors are expected to decline, shifting focus toward mixed-use developments or renovations of existing properties.

In the multifamily sector, developers are prioritizing mixed-use projects and suburban construction due to lower land costs and strong demand. Absorption rates should stay high in regions with solid job growth. CBRE reports that by mid-2025, multifamily construction starts will be 74% below their 2021 peak and 30% below pre-pandemic levels. As the pipeline contracts, strong renter demand will reduce vacancy rates and drive above-average rent growth in 2026.

Political and Economic Impacts

Political and economic factors will heavily influence the CRE landscape in 2025. Stabilizing interest rates may ease borrowing costs, but minutes from the Federal Reserve’s December 2024 meeting suggest that rates will remain elevated longer than expected. The volatility in the debt capital markets is projected to be a significant factor impacting transaction volume in 2025.

Pro-business policies, deregulation, and infrastructure investments under the current administration could also create opportunities for CRE growth. However, rising operational costs and evolving tax policies remain potential challenges. Additional details follow.

Multifamily Market Outlook For 2025

Rent Growth in Multifamily

The multifamily market is expected to see modest rent growth, with national trends pointing to a 2.6% increase. Demand for rental housing remains robust, particularly in suburban and secondary markets where affordability and quality of life are key drivers. These areas are expected to outpace urban centers in rent growth as renters seek cost-effective alternatives.

Occupancy Growth in Multifamily

Multifamily occupancy rates are projected to stabilize with a national vacancy rate around 6.0%, reflecting an equilibrium between new deliveries and absorption. Urban areas may experience slightly higher vacancy rates due to new construction and demand for larger homes, while suburban regions could see lower vacancy rates driven by migration trends.

New Deliveries and Absorption

The multifamily market is anticipated to achieve equilibrium in 2025, with unit absorptions expected to surpass new deliveries. This dynamic will likely lead to a decline in vacancy rates, supporting a more balanced market. Cushman & Wakefield suggests that this balance is crucial for maintaining market stability and encouraging sustained investment.

Developers are expected to focus on mixed-use projects, integrating multifamily properties with commercial, office, and retail components. Suburban and secondary markets will see more new construction due to lower land costs. Absorption rates will remain strong, particularly in regions with job growth and solid economic fundamentals, ensuring steady demand for multifamily units.

Loan Maturities and Financing Opportunities

A significant volume of multifamily loans is set to mature in 2025 and 2026, contributing to the $1.8 trillion in commercial real estate debt maturing before 2026. Loan maturities in 2025 and 2026 present unique challenges and opportunities for investors. Borrowers with loans secured at historically low rates may struggle to refinance at higher rates, leading to potential distressed sales. For well-capitalized investors, this environment creates opportunities to acquire properties at a discount or offer alternative financing solutions such as mezzanine financing or preferred equity.

Refinancing Challenges

Higher interest rates could pose refinancing challenges for borrowers who secured loans at historically low rates. The potential increase in borrowing costs may impact cash flows and property valuations. Stricter loan-to-value (LTV) and debt service coverage ratios (DSCR) requirements could further complicate refinancing efforts, requiring borrowers to inject additional equity to meet new terms.

Capital Market Dynamics

The availability of capital will be crucial in navigating the refinancing landscape. Well-capitalized investors are likely to benefit most, leveraging opportunities arising from market dislocations. Geographic variability will also play a role, with regions experiencing robust rent growth and low vacancies being less affected than those facing economic challenges.

Political And Economic Impact 

Political and economic conditions will continue to shape the CRE landscape in 2025. Interest rate stabilization could provide relief for borrowers, though projections from the Federal Reserve’s December 2024 meeting suggest that rates may remain elevated for longer than some expect. Volatility in debt capital markets is anticipated to be a key factor influencing transaction volumes.

Policies focused on deregulation, tax incentives, and infrastructure investment could provide growth opportunities. However, potential challenges such as rising operational costs and shifting tax policies remain considerations for investors. These projections depend on the evolving economic and political landscape and are subject to change.

Interest Rates

A Trump administration may favor policies that encourage lower interest rates, reducing borrowing costs and making it easier for investors to finance acquisitions and developments. However, this approach could carry inflationary risks, necessitating vigilance from the Federal Reserve.

Deregulation

Reduced financial and environmental regulations could streamline lending processes and expedite development, especially in sectors like industrial and logistics, where speed is critical.

Tax Incentives

Continuing or expanding provisions like the Tax Cuts and Jobs Act (TCJA) could benefit CRE through lower corporate tax rates, favorable real estate investment rules, and enhanced Opportunity Zone programs, boosting development in underserved areas.

Infrastructure Spending

Potential increases in infrastructure investments may enhance property values and attract businesses by improving transportation and utilities.

Trade Policies

Pro-growth policies could boost domestic manufacturing and demand for industrial real estate, although tariffs on construction materials may raise development costs.

Overall Economic Growth

Pro-business policies may drive economic expansion, increasing demand for office, retail, and industrial properties while indirectly supporting mixed-use developments through employment growth.

Wilkinson Target Market Outlook

At Wilkinson, we are focusing on three dynamic metropolitan areas: Atlanta, Dallas-Fort Worth, and Indianapolis. These markets, while diverse, share strong economic fundamentals and offer substantial growth potential in 2025.

Atlanta:
Stability and Growth 

Atlanta’s multifamily market is poised for steady growth, with rental rates and occupancy trending upward. The city’s expanding job market and the forecasted addition of nearly 40,000 new residents will continue to fuel demand for rental properties.

• Employment Growth: Projected to rise 0.6% YOY by the end of 2025.

• Income Growth: Median household income is expected to reach $95,156, up 3% YOY.

• Rental Market: Effective rent is anticipated to grow 2% YOY to $1,709, and occupancy will rise slightly to 92.4%.

Atlanta Data

Dallas-Fort Worth:
Strong Performance Across Sectors

Dallas-Fort Worth remains a leader in net absorption and new supply, with balanced growth across its multifamily markets. Strong employment growth and rising household incomes will support continued stability.

• Employment Growth: Expected to grow 1% YOY.

• Income Growth: Median household income is expected to rise to $89,297, up 2.9% YOY.

• Rental Market: Effective rent is forecasted to rise 2.9% YOY to $1,589, while occupancy will increase to 93.4%.

Dallas-Fort Worth Data

Indianapolis:
Affordable Growth

Indianapolis offers a highly affordable market with a diverse economy and opportunities for long-term investment. While slight dips in occupancy are expected due to increased supply, rising rent and income levels will sustain demand.

• Employment Growth: Forecasted to increase 0.5% YOY.

• Income Growth: Median household income is expected to reach $82,355, up 2.6% YOY.

• Rental Market: Effective rent is expected to rise 3.3% YOY to $1,299, while occupancy is expected to dip slightly to 93.5%.

Indianapolis Data

Wilkinson's Strategic Positioning For 2025

National Outlook Summary

The multifamily real estate market in 2025 is set for growth, supported by stabilizing interest rates and strong demand fundamentals. High occupancy rates and robust rental demand, coupled with a slowdown in new construction, are creating a favorable environment for investment.

Wilkinson Outlook Summary

Wilkinson's strategic focus on Atlanta, Dallas-Fort Worth, and Indianapolis aligns with key market trends. These three key markets align perfectly with the broader trends shaping the multifamily sector in 2025. Atlanta, Dallas-Fort Worth, and Indianapolis offer a unique combination of strong economic growth, rising rental demand, and competitive acquisition opportunities. With favorable market conditions and a strong outlook for both rent growth and occupancy, Wilkinson is well-positioned to leverage these dynamics for sustained portfolio growth.

Key Take-aways

As we look ahead to 2025, the CRE and multifamily markets reflect a balance of challenges and opportunities. The multifamily sector’s strong demand, technological advancements, and favorable demographic trends position it as a leader in new investments. Meanwhile, political and economic dynamics underscore the need for adaptability and informed decision-making.

• Multifamily Demand: Renters continue to favor multifamily living, driven by affordability challenges in the housing market.

• Economic Growth: Employment and household income are projected to rise across major markets, supporting rental demand.

• Stabilizing Rates: Interest rates are expected to stabilize, creating a more favorable investment environment.

• Encouraging Political Environment: Policies and regarding interest rates, deregulation, infrastructure spending.

As the national multifamily market remains on track for growth, the cities we focus on at Wilkinson provide particularly exciting opportunities for investors seeking strong returns.

As we move into 2025, the market is full of exciting opportunities, and our team is here to help you capitalize on them. Share your thoughts or questions by replying to this email, and let’s discuss how we can position you for success. With a deep understanding of the trends and markets shaping the future, we’re ready to partner with you to make 2025 a year of growth, profitability, and smart investments. 

Author Notes

The multifamily sector, in particular, offers promising opportunities amid shifting migration trends and refinancing challenges. By focusing on innovative strategies and understanding local market dynamics, investors can position themselves to thrive in this evolving environment. At its core, real estate investment remains a dynamic field where foresight and flexibility yield the greatest rewards.

At Wilkinson, our focus on innovative strategies and community-building initiatives will further enhance the appeal of our properties, fostering long-term growth and stability in the communities we invest in. With a clear vision and strong operational capabilities, we are well-positioned to thrive in this promising new chapter for multifamily real estate.

Ready to explore passive real estate opportunities? Learn how a diversified multifamily portfolio can become part of your passive investing strategy. Schedule a time to visit with David here: https://wearewilkinson.com/bookdm

About the Author

David McKinney is the Managing Director and EVP of Investor Relations at Wilkinson, where he leads the strategic development of real estate funds. With over $2.5 billion in transactions completed during his tenure, David leverages his strategic insights and emotional intelligence to enhance client and team experiences. Beyond his professional endeavors, he is a husband and father, enjoying outdoor adventures in lakes and mountains near his home in Washington State, and he is actively involved in his community as a Rotarian, committee chair advisory board member reflecting his commitment to leadership and service.

*This does not constitute an offer to sell or the solicitation of an offer to buy securities. Securities may be sold only to accredited investors and only through an offering memorandum. No person has been authorized to give any information or to make any representations in connection with any offering of Wilkinson Corporation’s securities other than the information and representations contained in the offering memorandum. All prospective investors should read the offering memorandum and consult with their own legal, accounting, tax, and financial advisors before deciding to invest. This email contains forward-looking statements that relate to future events, future developments, or forecasts of a property’s or fund’s future financial performance. All investments involve risks and uncertainties and these statements are only predictions based upon assumptions. Actual events or results may differ materially. There is no guarantee that any fund’s objectives, future results, levels of activity, performance, or plans will be achieved.​ 

References:

• Cushman & Wakefield. "Multifamily Market Shift." Cushman & Wakefield.

• Fannie Mae. "Fannie Mae Multifamily Market Commentary." Fannie Mae.

• Mortgage Bankers Association. "MBA Forecast." MBA.

• Scotsman Guide. "Will Commercial Real Estate Return to Normal in 2025?" Scotsman Guide.

• CRE.org. "Uncertainty Persists Across Politics, Debt Maturities, Insurance, Artificial Intelligence, and Housing." CRE.

• CREDaily. "Key Trends Shaping Commercial Real Estate in 2025." CREDaily.

• CBRE.com. “Cyclical Recovery Just Ahead”. CBRE.com.