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Class A Rents Climb Higher Even as Occupancy Trails Lower-Tier Apartments

Class A Rents Climb Higher Even as Occupancy Trails Lower-Tier Apartments

Nationwide effective asking rents fell 0.7% in the year ending October 2025, the steepest annual decline in over four years.

Jordan B.
December 05, 2025

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Good morning. Class A apartments continue to see rent growth despite elevated supply and softer occupancy. The gap between price and performance is starting to show.

CRE Trivia 🧠

Which U.S. state gained the most residents from domestic migration in the latest annual Census data?

(Answer at the bottom of the newsletter)

Market Snapshot

S&P 500

GSPC

6,857.12

Pct Chg:
+0.11%

FTSE NAREIT

FNER

762.22

Pct Chg:
-0.024%

10Y Treasury

TNX

4.102%

Pct Chg:
+0.044

SOFR

30-DAY AVERAGE

3.99%

Pct Chg:
-0.00

*Data as of 12/04/2025 market close.

Leasing Dynamics

Class A Rents Climb Higher Even as Occupancy Trails Lower-Tier Apartments

Despite relentless new supply, Class A apartments are defying the odds with steady rent growth, even as occupancy slips behind Class B and C assets.

Holding strong: Elevated supply has softened U.S. apartment fundamentals, but demand remains strong, especially for Class A units. In October 2025, Class A occupancy held at 94.6%, just below Class B and C at 95%, which now lead in overall occupancy despite being slightly under their historical norms.

Trending down: Nationwide, effective asking rents fell 0.7% in the year ending October 2025, the steepest annual decline in over four years. Class C units saw the biggest drop at 3.2%, the sharpest in nearly 14 years. Class B wasn’t far behind, with rents down 0.6% YoY.

Class A rent streak: While lower-tier segments struggled, Class A apartments posted a 1.4% rent gain—below pre-pandemic norms but marking 55 straight months of growth and continued top-tier resilience.

How the numbers stack up: The $560 spread between Class A and B reflects both continued luxury demand and affordability constraints in the lower-tier segments.

Class A Rent: $2,370/month
Class B Rent: $1,818/month
Class C Rent: $1,521/month

➥ THE TAKEAWAY

Premium pricing persists: Class A apartments continue to command premium rents amid consistent demand and resilient performance, even as occupancy lags. With rents still climbing, investors may find opportunity in the high-end despite broader market softness.

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✍️ Editor’s Picks

Smart tax prep: This 2026 Tax Planning Checklist empowers property owners to uncover savings, strengthen cash flow, and head into filing season confident, organized, and ready to maximize incentives. (sponsored)
Tiny tenants: Institutional investors are pouring money into early education real estate as the $65B child-care market rapidly expands to meet surging demand and chronic supply shortages.
Dividend forecast: U.S. REIT dividends are projected to grow just 2.8% in 2026, with specialized and retail REITs leading the way as office and hotel sectors continue to struggle.
Momentum building: U.S. commercial real estate transactions jumped 25% YoY in Q3, fueled by rate cuts, revived investor appetite, and a return of large deals.
Inheritance boom: As trillions shift to a younger generation of ultra-wealthy Americans, family offices are doubling down on CRE.
Cut signal: A surprise drop of 32,000 private-sector jobs in November—driven by small-business losses—has bolstered market expectations of a December rate cut.
Traffic jam: Commute times are nearly back to pre-pandemic levels, rising to 27.2 minutes in 2024 as remote work declines.
Credential change: A proposed rule change could eliminate college degree requirements for certified appraisers, aiming to reduce barriers to entry and address industry decline.

🏘️ MULTIFAMILY

Rent retreat: Multifamily and build-to-rent advertised rents declined again in November, with 90% of top metros posting negative growth.
Defying odds: Manhattan luxury home sales jumped 25% in November after Mayor Mamdani’s election, defying predictions of a wealthy exodus.
Optimistic outlook: CRE heads into 2026 with cautious optimism, as AI investments, lower rates, and improving fundamentals drive renewed activity in office, multifamily, and industrial.
Gen Z standard: Gen Z renters expect fast service, thoughtful design, and human-centered tech, raising the bar for multifamily operators shaped by their student housing experience.
Occupancy dip: DFW multifamily occupancy slipped to 93.8% in Q3 as a wave of new deliveries hit the market, pushing owners to offer concessions.
Pivot to housing: Irvine Co. won approval to convert a Newport Beach office park near John Wayne Airport into 700 apartments and retail.

🏭 Industrial

Cloud footprint: Amazon bought a $78M Pasadena flex property to expand its U.S. data center strategy, signaling a shift from leasing to owning critical infrastructure.
Costco controversy: York County approved a $240M Costco distribution center near Charlotte, sparking backlash over a $25M incentive deal that shifts tax burdens to local entities.
Power bottleneck: Phoenix’s data center boom is slowing as power shortages, stricter regulations, and public pushback threaten future development.
Border buildout: Industrial development is surging along the U.S.-Mexico border as nearshoring, low tariffs, and rising trade drive demand for logistics space.
Bubble trouble: IBM’s CEO and Fitch Ratings are warning that Big Tech’s $8T AI data center spree may never deliver the returns needed to justify the hype.

🏬 RETAIL

Holiday slowdown: Holiday spending is slowing in South Florida, with rising vacancies, falling rents, and weak in-person shopping dragging down retail momentum.
Skyview sale: Blackstone is selling The Shops at Skyview in Queens to a TPG–Acadia venture for $425M.
Slow selloff: Macy’s is easing the pace of store sales, now targeting $150M for 2025, as it holds out for better pricing in a tough real estate market.
Anchored appeal: Milan Capital bought the 95%-leased Pavilion Shopping Center in Vista, CA, from Brixton Capital for $30.5M.

🏢 OFFICE

Dividend drop: Alexandria Real Estate slashed its dividend by 45% amid mounting losses, falling occupancy, and weak lab space demand.
AI footprint: Distyl AI leased a full floor at 135 Madison Ave., adding to Manhattan’s growing roster of AI tenants.
Second attempt: Blackstone is reconsidering a sale of its Canary Wharf office building, Cargo, as market sentiment for East London offices shows signs of recovery.
Asset gap: Two major Chicago office deals underscore the widening gap between top-tier trophy assets and struggling older towers, with Bank of America Tower securing $700M refinancing while 190 S. LaSalle sold for just $55M.
Flex demand: Coworking space grew 23% nationwide between 2023 and 2025, with cities like Charlotte, Austin, and Gilbert leading the surge.

🏨 HOSPITALITY

Atrium overhaul: Dallas’ Hilton Anatole will undergo a $100M renovation through 2028, updating guest rooms and event space to keep pace with the city’s growing luxury hotel market.
Strip stability: Blackstone secured a $3.15B refinancing for its Las Vegas casino portfolio—backed by an $800M Realty Income investment.
Residence required: Caribbean luxury hotels are embracing branded residences as a must-have for ROI, capital leverage, and meeting rising demand for personalized, multigenerational stays.

WINTER ESSENTIALS