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Luxury Apartments Are Quietly Driving Rents Down in Hot U.S. Markets
Markets that built more apartments saw meaningful rent reductions, while cities with less new construction saw rents hold steady.
Jordan B.
December 30, 2025
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Good morning. A wave of luxury apartment openings is reshaping rent trends in cities like Austin, Denver, and Phoenix. Surprisingly, high-end supply is driving prices down—at least for now.
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Market Snapshot
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Luxury Effect
Luxury Apartments Are Quietly Driving Rents Down in Hot U.S. Markets
A boom in high-end apartment development is nudging down rents in some major U.S. cities, especially for older buildings.
Luxury drives rent drop: An influx of luxury apartments in cities like Austin, Denver, and Phoenix triggered the biggest U.S. rent drop in over 15 years. CoStar reports a 0.18% average rent decline in November, as new buildings pulled tenants from older units, forcing landlords to lower prices.
Trickle-down relief: Rents in some older apartment buildings have dropped as much as 11%, falling below even the designated affordable housing rate. The trend challenges assumptions about luxury construction, as high-end supply is indirectly easing pricing pressure.
Supply meets demand: Fueled by pandemic migration and low rates, Sun Belt metros saw a surge in development—Austin added 10,000+ units in Q3 2024, Phoenix nearly 8,000, and Denver over 5,000. These cities saw the sharpest rent drops, reinforcing the link between supply and affordability.
A rare market correction: “This is a generational development cycle,” said Grant Montgomery of CoStar, comparing the surge in supply to the mid-1980s. New construction volume—mostly luxury—has temporarily outpaced demand, giving renters more options and shifting bargaining power.
Tightening ahead: Despite short-term relief, developers are pulling back in oversupplied markets, with completions expected to fall by half in 2026. Camden and other major operators are prioritizing occupancy now, but expect rent growth to rebound as supply tightens.
➥ THE TAKEAWAY
Supply buys time: Luxury supply may not be the silver bullet for the housing crisis, but it’s proving to be an effective short-term pressure valve, especially when affordability efforts are lagging behind.
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✍️ Editor’s Picks
Level up in 2026: From fast-track analyst programs to elite university certificates, these top CRE courses will sharpen your skills and elevate your career in the year ahead.
Crossing over: The Kansas City Chiefs are moving across state lines to Kansas, a surprising win for long-overlooked KCK over its wealthier Missouri twin.
Growth roles: Key 2026 job gains in HR, accounting, logistics, and events signal where future CRE demand will cluster.
High stakes: Trump’s move to reclassify marijuana eases taxes and boosts real estate prospects, but stops short of full legalization.
Alt boom: Alternative investments are on pace to top $200B in 2025 fundraising, fueled by strong demand for credit strategies and a pullback from non-traded REITs.
Data dilemma: Mixed signals from jobs and GDP data leave economists unsure if the U.S. is heading for a boom or a downturn.
Power families: Family offices now control over $5.5 trillion and are rapidly becoming major players in Wall Street deals, rivaling hedge funds and private equity firms.
🏘️ MULTIFAMILY
2026 reset: After a sluggish 2025 marked by high vacancies and flat rents, the U.S. multifamily market is poised for a slow recovery in 2026.
Renter's market: A wave of new apartments is pushing rents down in many cities, making early 2026 one of the best times for renters in years.
Refi pressure: California faces rising affordable housing loan maturities, but strong demand and new policy support are easing refinancing risks.
Home stretch: Mayor Eric Adams launches a plan to add 100,000 homes in Manhattan by unlocking zoning, public land, and underused sites before leaving office.
🏭 Industrial
Boom town: Atlanta’s industrial market is booming, with construction nearly tripling YoY and $1.6B in sales.
Desert deal: VanTrust sold a 586K SF warehouse in Las Vegas to Saddle Creek Logistics for $97M.
Intel invests: Intel plans a 107,000 SF manufacturing buildout at its Santa Clara campus despite ongoing cost cuts.
Tower trade: StratCap REIT sold 48 cell towers for $55.1M to pivot toward data centers and strengthen its digital infrastructure focus.
Storage refi: Basis Industrial secured a $101.5M refinance from BlackRock for a seven-property self-storage portfolio spanning six states.
🏬 RETAIL
Consumer strength: Despite early closures and bankruptcies, retail rebounded in late 2025 with strong leasing, limited new supply, and record-high pricing for shopping centers.
Retail relic: Sears is nearing its end as Seritage offloads its final assets to repay debt, closing the chapter on a once-dominant retail empire.
Data persuasion: Lesser-known cities are using hyperlocal data and AI tools to attract national retailers.
Suburban buy: Hines locked in a $151M loan for Charlotte’s Birkdale Village, backing its recent $274M retail acquisition amid rising local demand.
🏢 OFFICE
Urban exodus: Downtown Dallas is struggling as companies abandon aging office space for safer, amenity-rich suburbs.
Sublet shift: With premium office space in short supply, tenants are increasingly eyeing high-quality subleases as a viable alternative heading into 2026.
Brand refresh: CBRE relocated to 300 N. LaSalle in Chicago, unveiling a tech-enhanced, flexible office designed to boost collaboration and reflect its modern brand.
Sweet expansion: Following its $36B acquisition of Kellanova, Mars is planning a major new office in Chicago’s Fulton Market, leasing over 100,000 SF at Trammell Crow’s Fulton Labs building.
🏨 HOSPITALITY
Mini parks: Entertainment giants are investing in smaller, immersive attractions—like Netflix House and Area15—as cost-effective alternatives to traditional theme parks.
Culinary living: Sam Nazarian’s HQ Residences Miami will offer luxury living with upscale dining and wellness, blending hospitality and community in a residential setting.
📈 CHART OF THE DAY
Source: JBREC and CRE Daily
CRE investors are bracing for a rise in distressed deals in 2026, with multifamily and office sectors leading the concerns, while industrial and retail remain relatively steady.<br>
CRE Trivia (Answer)🧠
Kiribati, specifically, its Line Islands (including Kiritimati, or Christmas Island), which sit in the world’s earliest time zone (UTC+14).
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