After a few turbulent years, the multifamily sector is showing real signs of stabilizing—and even strengthening. But if you’re a passive investor, that doesn’t mean it’s time to jump into every deal that crosses your desk.
The data is promising, yes. But data without context can be misleading. And when capital starts flowing back into a sector too quickly, underwriting discipline often flies out the window.
We’ll unpack what’s really happening in the multifamily space, why investors remain confident (despite macro noise), and what passive investors like you should be focused on right now.
📊 The Hard Data: CBRE’s Q1 2025 Multifamily Snapshot
CBRE’s Q1 report paints a picture of renewed momentum in multifamily:
- Renter demand outpaced new supply, lowering the national vacancy rate to 4.8%.
- Net absorption surged to 100,600 units—the highest Q1 absorption since 2000.
- Effective rent growth ticked up to 0.9% year over year.
- Sixty-three out of 69 tracked markets recorded positive net absorption—rare for Q1.
- Construction completions slowed to 71,000 units, down from 120,000 in Q4 2024.
If you zoom out, this is exactly the kind of story long-term investors like to see: demand rebounding, supply pulling back, and rents beginning to recover—setting the stage for more stable cash flows.
📉 The Recovery Is Uneven—and That Matters
In a recent LinkedIn post, I broke down where transactions are still happening in today’s environment. Here’s the short version: Investors are still active, but only in very specific corners of the market:
1. Build-to-rent (BTR) with high occupancy and solid tenant demographics
2. Distress and loan sales where equity has been wiped out, but the asset has long-term potential
3. Stabilized suburban deals with strong cash flow and long hold periods
4. Low-leverage, low-risk strategies focused on wealth preservation rather than aggressive upside
Deals outside these zones? Much quieter. The bid-ask spread is still wide, and lenders are tight. That’s keeping a lid on transactions—and frankly, that’s a good thing for disciplined investors.
🧠 Investor Sentiment: Confident, but Not Carefree
The sentiment among institutional players right now is cautious optimism. According to GlobeSt., investors at CBRE’s recent multifamily conference showed minimal concern about political noise, tariffs, or policy shifts. Instead, they’re focused on fundamentals: tenant demand, rent growth, operating expenses, and debt.
Here’s the quote that stood out to me: “Trade barriers may actually limit future development, which supports existing asset values and helps absorption catch up.”
In other words, the headlines might be noisy, but the math is starting to make more sense again—if you’re looking at the right properties, with the right partners, and the right time horizons.
📌 My Framework for Investing in This Market
In another recent post, I addressed a big question: “What’s going to happen with CRE pricing over the next 18-24 months?”
My honest answer: I don’t know. And neither does anyone else.
So rather than trying to time a pricing bottom, I’m focused on timeless principles that work in any market:
1. Buy deals with real cash flow from day one.
2. Demand a meaningful risk-adjusted return for locking up your capital.
3. Back sponsors with flexible, adaptable business plans.
4. Ensure there’s sufficient liquidity to ride out volatility.
🔍 What Passive Investors Should Be Asking Today
If you’re a passive investor, the opportunity today lies in being selective—not sidelined. The market is starting to reward well-underwritten deals again. But to separate signal from noise, here are the questions I’d be asking:
- Is this deal in one of the “active corners” of the market—or is it banking on a turnaround?
- Are rent growth projections realistic, given local supply and wage dynamics?
- Is the sponsor experienced in this kind of market—not just in boom cycles?
- What’s the real plan for interest rate risk, cash flow timing, and reserves?
Don’t be distracted by flashy IRRs. This market rewards grounded assumptions and conservative structuring.
✅ The Thesis in One Sentence
Multifamily is recovering—but only in specific pockets. For passive investors, the winners will be those who back conservative operators targeting durable cash flow, not just paper upside.
📬 Final Thoughts
This is not a “rising tide lifts all boats” environment. It’s a market that punishes overly aggressive underwriting, over-leveraged deals, and sponsors who didn’t plan for the downside.
But it’s also a market that quietly rewards discipline, experience, and patience. If you’re thinking long-term, focused on income-producing assets, and investing with people who operate with a margin of safety, you’re in a good spot.
Stay disciplined.
About The Author
Paul Shannon has acquired over 200 residential units, by “recycling equity” and/or joint venturing. He has experience in underwriting, acquisitions, raising capital, property management, project management, and is a licensed Realtor.
Paul is also a limited partner, investing in over 40+ deals as a passive investor – Multifamily, industrial, sale leasebacks, preferred equity, 1st and 2nd position notes, ATMs, mixed-use development and private equity.
These experiences have led to the formation of InvestWise Collective, a customizable fund aimed at helping investors diversify out of traditional markets into passive real estate opportunities.