New Apartment Report From ALN

The Real Estate Espresso Podcast

New Apartment Report From ALN

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New Apartment Report From ALN

Welcome to The Real Estate Espresso Podcast, your morning shot of what’s new in the world of real estate investing. I’m your host Victor Menasce. On today’s show, we’re showcasing a report that was published on October the eighth by ALN Apartment Data. This is their multifamily market update for 2025. There are some surprising conclusions.

Two major developments have defined the multi-family area this year. Both have been widely felt. The first is a deceleration in new apartment supply. This outcome has been widely anticipated since the construction boom last year reached its peak. The second is a broad resurgence in apartment demand that’s exceeded nearly everyone’s expectations, including mine.

While the slowdown in new deliveries was already forecasted, the scale and breadth of the market demand recovery has caught the industry by surprise. It’s not just a rebound, it’s a synchronized surge across asset classes, across market segments and across regions.

Through September of this year, over 580,000 new units have been absorbed nationwide. That’s more than double last year’s total through the same point in time and just shy of the exceptional absorption in 2021. Coming into the year, most analysts expected incremental improvement in demand, maybe a modest continuation of 2023 gains- but instead, we’ve witnessed a market that has been reignited, a market that rivals record setting absorption we saw in the post-pandemic era.

If we step back, the year-over-year absorption picture is even stronger. More than 600,000 units were absorbed nationally in the 12 months ending in September. That’s more than twice the pace of the prior year and second only to 2021 among the last five years. What makes this sustained uptrend remarkable is the resilience shown amid all of the uncertainty we’re seeing. Economic and geopolitical volatilities have been constants. We’ve dealt with a cooling global economy, inflation jitters, trade wars, political stalemates. We also have a shrinking population as people are being deported and fewer people are entering the country as new immigrants.

Amid this complex scenario, a bunch of fundamentals are quietly aligning to support rental housing. First, the single-family resale market remains pretty much gridlocked. Wage growth, after years of stagnation, has turned positive in real terms and the labor market, despite showing some cracks, remains tighter than average. It’s also relevant to recall that there was unfulfilled demand in 2022 and 2023, which is finally materializing. Most importantly, this recovery has been widespread. It’s not confined to one asset class or one geography.

Starting with Class A, among the four price classes, Class A properties have undoubtedly led the charge. That’s where all the new product is. In the past 12 months, more than 165,000 units were absorbed, surpassing the performance of 2021. This sort of strength is exactly what the sector needs. With new supply still working its way through lease-up phases, the solid demand at the top of the market helps stabilize fundamentals and prevent overhang.

But the story doesn’t end at the top of the ladder. Class B and Class C also delivered exceptional results, with year-over-year absorption more than doubling the prior year’s record. Both these segments shared totals only recently eclipsed by 2021, reflecting healthier rental activity in the market.

The real surprise came from the Class D segment, the lower end of the market that’s been struggling for traction since the 2022 downturn. Earlier this year, there were signs of life, but expectations were cautious. Fast forward to today, Class D absorption has hit nearly 60,000 units in the past 12 months, up from fewer than 10,000 units the year before. This improvement signals that even the most affordability-constrained tenants are continuing to return to the market, a critical indicator of broad-based economic participation.

Let’s look next at different sized markets. From the largest markets to the smallest micro-markets, every sector has participated in the recovery. Tertiary markets have been especially notable in this year’s report. Over the past year, approximately 85,000 units were absorbed in tertiary markets—three times last year’s rate. That’s the strongest figure in the last five years. This expansion was primarily centered in the Sun Belt region, which continues to attract population and employment growth.

Of course, primary markets—those big demand engines—have fulfilled exactly what we would expect in a recovery cycle. Nearly 400,000 units were absorbed in the past year, more than doubling the previous annual total. This marks the second-highest total in the last five years. Secondary markets were also strong with over 70,000 units absorbed through September. The Sun Belt dominated the leaderboards once again, but interestingly, St. Louis and Grand Rapids also made it into the top 10, signaling that recovery is not just a southern story. Even micro markets improved with about 13,000 units absorbed. Although the volume is small, the growth rate exceeded 50 percent year-over-year, making it the best performance of the last five years.

In summary, the improvement has been universal. It’s across price points, market sizes, and geographies. The two dominant narratives of declining supply and surging demand were both anticipated, but their magnitude surprised us. What’s particularly encouraging is the breadth of the recovery. From luxury to affordable, every class has seen improvement. It’s happening in every region, from primary metros to micro markets.

However, there is still uncertainty as we look ahead. The labor market is showing definite signs of softness. We’ve got inflation remaining volatile, partly a result of the trade wars. Global trade and geopolitical risk can’t be ignored. Fewer units of supply are entering the pipeline, which could paradoxically slow absorption because you can’t absorb units that don’t exist.

The message for both investors and developers is one of cautious optimism. The market that seemed to be oversupplied is in fact normalizing. We’re witnessing robust demand, and occupancy metrics are improving. That’s good news for the sector as a whole. So, go out, get a copy of the ALN report. I’m interested to see if the other reports, for example from CoStar and Fannie Mae, will mirror these findings.

As you think about that, have an awesome rest of your day. Go make some great things happen. I’ll talk to you again tomorrow.