For the data behind the commentary, download the full Q3 2025 U.S. Multifamily Report.
Converging Vacancy Rates Paint Starkly Different Narratives
Throughout 2025, overall vacancy has trended lower; for three sequential quarters, the vacancy rate has declined from 9.22% to 9.02%, in line with the vacancy rate a year ago. While it remains 200 basis points (bps) above the long-run average, the direction of travel has inflected. Conversely, stabilized vacancy, which removes new assets that haven’t yet had a chance to lease up, continues to climb as renters chase concession packages offered largely by newly delivered assets.
Overall vacancy is improving as new assets lease up quickly, helping to drive strong absorption figures. However, existing assets have experienced modest occupancy erosion. Stabilized vacancy remains roughly 90 bps below its historic peak, suggesting the market has absorbed much of the recent supply influx.
The decline in vacancy is most evident in former (and still active) construction hot spots and pandemic-era darlings, where demand remains robust. Over the last quarter, Charleston, Durham and Boise led the nation in occupancy growth, with Palm Beach and Austin not far behind. This is a welcome sign amid the supply wave, indicating how quickly conditions may normalize once new deliveries taper off. Conversely, lower-growth and supply constrained markets generally saw vacancy rates rise as new deliveries were met with slower lease-up velocity. Omaha, Stamford and Ventura posted some of the largest increases in vacancy over the past three months.
Rent Growth Weakened in Q3
For the second consecutive quarter, rent growth softened, coinciding with weaker job growth and elevated economic uncertainty. In response, most owners adopted more defensive leasing strategies focused on preserving occupancy rather than growing rents. This became such a priority that rent growth in the third quarter fell to levels last seen at the onset of the pandemic. Much of that weakness is concentrated in new leases, while renewal rents remain comparatively resilient, hovering around 3%-4% nationally. With the supply pipeline easing, rent growth could reaccelerate if economic anxiety is assuaged.
The Bay Area has emerged as a national leader in rent growth, driven by renewed venture capital investment in AI, wider return-to-office mandates, and a notable improvement in crime and livability. San Francisco leads all markets, with rents up 7.8% YOY, followed by San Jose at 5.2%. Both the Midwest (3.2%) and Northeast (3.4%) have outpaced the national average, effectively doubling national rent growth. Between both regions, only Des Moines, which has delivered 10% of its inventory over the past three years, has underperformed the national benchmark. The largest cities in both regions have led the way: Chicago registered 4.2% YOY rent growth, and New York saw rents grow by 3.7% over the past year. The South region , where the bulk of new supply has come online and where supply-demand dynamics remain most imbalanced, experienced the weakest rent growth of any region, at just 0.6% YOY.
The Construction Pipeline Is Emptying Quickly
Record deliveries over the past two years have led to sharp pullback in new construction activity. Between expensive construction loans, the ability to buy assets below replacement costs, alongside a more challenged fundraising environment for development deals, very little new product is breaking ground today. While the latest U.S. Census data suggests a recent uptick in multifamily starts, there are reasons to question the accuracy of the data. No third-party data providers that track construction activity are reporting a similar rebound. Instead, most sources report that starts activity has fallen to levels last seen in 2012, rather than showing signs of acceleration.
The decline in starts has translated to a falloff in the overall construction pipeline. Around 450,000 units remain under construction, the lowest level in a decade, and further declines are expected in the quarters ahead. The overall pipeline is down more than 50% from the peak and sits 17% below the pre-pandemic (2017-2019) average.
The slowdown is widespread, touching nearly every major market. Of the metros tracked by Cushman & Wakefield, only 11 saw an increase in their construction pipelines over the past year—and most of those gains were modest, with just one or two new projects breaking ground. New York led the retreat, shedding more than 22,000 units from its pipeline, followed by Dallas/Ft. Worth, Austin and Houston, each down by roughly 13,000 units.
For the data behind the commentary, download the full Q3 2025 U.S. Multifamily Report.
