Market Report

2026 Multifamily Real Estate
Market Outlook

Strategy • Structure • Opportunity

This report is designed for those who allocate capital to multifamily real estate funds. It presents a practical, data-driven outlook for 2026, across asset classes, regions and capital structures. The aim is not to dictate a single “best” approach—but to provide insight in the market.

Executive Summary

◼️ The cost of capital remains elevated: interest-rate uncertainty will influence underwriting, hold-period strategy and liquidity decisions in 2026.

◼️ Multifamily remains a core focus for many allocators, though emerging asset classes are gaining traction where scarcity, repositioning and operational improvement intersect.

◼️ Regions driven by job and population growth, particularly Sun Belt and select secondary markets, offer relative advantage over ultra-select primary gateway markets where supply and competition intensify.

◼️ It is a year for discipline: underwriting assumptions must reflect rise in input costs, cap-rate reset risk, local legislation, and operational inflation.

◼️ Capital structure matters more than ever: co-investment, fund vehicles or direct ownership should be evaluated with hold period, liquidity needs and operational capacity in mind.

Economic & Capital Markets Context

Macro Landscape

2026 enters under the shadow of elevated inflation and debt burdens. While core inflation may moderate, structural pressures keep real yields higher than in prior cycles. According to Deloitte’s 2026 Commercial Real Estate Outlook, 75 % of global leaders still plan to increase real-estate investment over the next 12-18 months, but with more caution around cost of capital and risk appetite. Deloitte+1

Mortgage and bond yields continue to reflect elevated risk premiums. As reported by Investopedia, mortgage rates are expected to stay above 6 % through 2026, despite potential cuts in the Fed funds rate. Investopedia+1 For investors, this means that entry underwriting must assume higher financing costs and potentially wider cap-rates which willimpact return models and exit strategies.

Interest-Rate & Cap-Rate Implications

Capital Flows & Liquidity

Total real-estate investment volumes have begun to recover. The Americas posted 12 % year-over-year growth in property sales through mid-2025. Deloitte Private capital remains active, but fundraising is skewed toward credit and niche strategies as core yields compress. For family offices, this signals that selectiveness and scale matter more than ever.

Asset-Class Outlook

Supply growth is decelerating. Newmark data suggests deliveries in 2024 were 585,191 units, expected to reduce toward 2026. Newmark Vacancy remains near cyclical lows (5.0 % in Q1 2025) even as rent growth has begun to accelerate in particular submarkets. This backdrop supports multifamily as a structural allocation, particularly in markets with constrained new builds and favourable demographic tailwinds.
The office sector remains bifurcated: trophy assets in gateway markets command rents and interest; lesser-grade buildings face elevated vacancy and restructuring risk. knowledge.uli.org Retail continues to evolve rather than return to previous norms: discount, convenience and experiential formats matter for investment selection.
Industrial has enjoyed structural tailwinds from e-commerce and supply-chain reshoring, but caution is required. CoStar forecasts greater vacancy in 2026 amidst slowing import volumes and freight headwinds. CoStar For allocations, the focus may shift toward well-located last-mile nodes, older buildings ripe for value-add, and strong tenant covenants.
Manufactured housing, senior housing, data centres and digital-infrastructure real estate are gaining inclusion in portfolios. Leading reports such as PwC & ULI’s Emerging Trends 2026 highlight “Niche to Essential Real Estate” as a major theme. PwC These build-out options cater to demographic shifts, affordability constraints and infrastructure scarcity which have increasingly become areas of interest for family-office investors seeking diversification beyond core.

Regional Market Insights

Markets to Watch (for what?)

Based on PwC/ULI Emerging Trends, the top 10 U.S. markets for 2026 (across property types) include:

Dallas-Fort Worth

Nashville

Jersey City

Northern New Jersey

Miami

Tampa-St. Petersburg

Brooklyn

Manhattan

Regional Rationale

Houston

Phoenix knowledge.uli.org

Gateway and near-gateway markets (Brooklyn, Manhattan, Miami) retain institutional liquidity and transparency but face greater supply and valuation competition.

Caution zones may include markets with large pipeline delivery volumes, regulatory headwinds or slower population growth.

Sun Belt metros (Dallas, Phoenix, Tampa) benefit from favourable migration, business-friendly regulation and housing affordability advantages.

Example Snapshot

In Houston, apartment construction is projected to decline toward ~11,000 new units in 2026, tightening supply and supporting rent growth (2.6-2.7 % annual) for 2025-2027. Houston Chronicle

Risks & Opportunity Framework

Principal Risks

Financing Risk: elevated interest rates, debt maturities and tightening underwriting.

Supply Glut: in specific segments (e.g., industrial) and geographies.

Regulatory & ESG Headwinds: zoning changes, tax reforms, climate-related costs (e.g., flood zones) may add costs and slow deals.

Potential Opportunity Areas

Value-Add & Repositioning: older assets redeveloped in infill markets or adaptive reuse scenarios.

Scarcity Plays: markets underserved by new supply, such as manufactured housing or underserved suburban multifamily.

Strategic Capital Structure: using co-invest platforms, opportunistic debt, or secondary strategies to achieve potentially enhanced returns.

Investment Strategy Decision Framework

Consider this matrix:

Strategy Type

Core-Plus Multifamily

Value-Add Reposition

Opportunistic/Niche

Risk Profile

Potential for lower risk, income focused

Generally Medium risk, Potential equity upside

Considered higher risk, Potential for higher return

Hold Period

5-10 years

3-7 years

3-5 years

Key Considerations

Know financing assumptions, supply pipeline,
market absorption rates

Execution risk, management capacity, market
absorption rates

Market timing, exit risk, capital intensity, regional
economic drivers

Considerations for Family Offices & Institutional Investors

Deal Sourcing & Ownership Structure

Direct ownership has historically been beneficial when the family office or institution has internal asset-management capability and seeks more control.

Fund/co-investment structures may suit offices and institutions seeking passive exposure with scale and outsourcing for operational expertise in an area the office or institution is not already well versed in.

Hybrid approach: direct priority in known markets+ fund exposure to niche or global themes.

Underwriting Focus

Base rent-growth assumptions on conservative scenarios (e.g., 1-2 % real growth) given inflation and cost pressures. Pay attention to submarket differences vs. MSA generalizations.

Assume financing cost 1-2 points higher than recent averages depending on potential capital stack; model cap-rate widening scenarios.

Stress-test multiple exit scenarios: e.g., if cap-rates widen 50–100 bps, what is the impact on IRR and equity multiple?

Hold-Period & Liquidity Planning

Given elevated cost of capital and execution risk, hold periods may lengthen. Plan liquidity accordingly: it is generally wise to set aside 3–5 % per annum of NAV in working capital/reserve for inflation, regulatory, and operational surprises.

Tax & Structuring Considerations

Look for the potential to leverage appropriate tax-benefits (e.g., depreciation, cost-segregation, 1031 like exchanges) but build realism into deferred gains. Consider how different partnership structures may align management incentives and offer the potential for downside protections.

Appendix & Disclosures

Data-table: Projected supply vs demand by asset class for 2026-2028

Chart: U.S. investment-volume growth trajectories (from Deloitte) Deloitte

Glossary of Terms (cap-rate, IRR, NAV, core/core-plus etc.)

Risk Disclaimer & Full Legal Disclosures (link to Five Buffalo Capital disclosures)