For the data behind the commentary, download the full Q2 2025 U.S. Multifamily Report.
Vacancy Improvement Continues Into Q2 2025
For the second straight quarter, net absorption outpaced new deliveries across the U.S. multifamily market, the first time the market has experienced sequential declines in the vacancy rate since 2021. Still, vacancy remains 200 basis points (bps) above the long-term average of 7%. Meanwhile, stabilized vacancy, which removes new assets that haven’t yet had a chance to lease up, remains 60 bps above its long-run average. Robust apartment demand continued to support the market in Q2, registering the sixth-best quarter for absorption since 2000.
Although demand remains strong by historical standards, it showed signs of weakening when adjusted for seasonality. Multifamily demand tends to peak in the second quarter—in a typical year over the past decade, the second quarter would ordinarily register about 30% more demand compared to the first quarter. This year, however, demand was up by about half that mark. Perhaps this is an early indication that weakening consumer sentiment is beginning to result in softer demand; both the University of Michigan (UMich) and Conference Board surveys of consumer confidence registered significant drops in the second quarter, with the UMich survey registering its second lowest reading in its history in both April and May. While this may seem like a minor detail given the overall strength of Q2 apartment demand, it’s a trend worth monitoring.
Rent Growth Took a Step Back
The decline in consumer sentiment has coincided with a noticeable shift among property owners toward more defensive leasing strategies. After several quarters saw sequential improvement in YOY rent growth, the current quarter went in the opposite direction, with average rent growth slowing to just 1.7%, a 50-bps deceleration from the previous quarter. This represents the sharpest quarter-over-quarter (QOQ) pullback since 2023. In addition to the rising economic uncertainty as the market digested news of reciprocal tariffs, Q2 also featured a wave of new deliveries after declining for a year. The latter may carry more weight when looking at the underlying monthly rental rate growth; weakness appeared in May (0.18% month-over-month) and June (0.03%) as opposed to April (0.22%), when tariffs were announced. Last year, the monthly growth rates for May and June were significantly higher at 0.33% and 0.15%, respectively.
Three standout regions emerge when looking at the data at a market level. The Bay Area is experiencing a notable resurgence, with San Francisco leading the nation in rent growth at 6.8% YOY. San Jose isn’t too far behind, ranking sixth nationally with a 4.5% increase. Chicago also highlights the continued strength in major Midwest markets, matching San Jose with 4.5% growth. Meanwhile, the New York and Northern New Jersey metros both registered more than 3.5% rent growth over the past year. What these regions share is a common trait, they all rank among the top 20 markets with the highest occupancy rates.
Construction Activity Has Declined Rapidly
Challenges obtaining construction loans at favorable terms have created a dearth of starts, leading to a significant decline in new development activity. Across the U.S. multifamily market, the construction pipeline has dipped below 500,000 units for the first time since 2017 (though overall levels were only lower in 2016) as new starts remain at levels last seen in 2012. Just 3.8% of the national inventory is under construction—less than half the peak share recorded in 2023. The bulk of the previous cycle’s construction surge has already run its course, and given current financing constraints, development activity will likely remain muted into the foreseeable future.
Multifamily construction is declining in nearly every market tracked by Cushman & Wakefield. Just 11 markets recorded pipelines increases over the past year, though most of those markets only expanded by one or two new projects breaking ground. Dallas/Ft. Worth led the decline with a contraction of more than 22,000 units, followed by New York and Austin at roughly 18,000. Phoenix, Atlanta, Houston and Washington, DC all saw their pipelines decline by at least 10,000 units over the past year.
For the data behind the commentary, download the full Q2 2025 U.S. Multifamily Report.
