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Multifamily Starts Sink to Lowest Point Since Fall 2024
Multifamily construction dropped 30% in May, but permits tell a different story.
Jordan B.
June 19, 2025
Together with
Good morning. May marked a sharp slowdown for multifamily starts, but don’t call it a collapse. Permits are up, and falling vacancy rates may soon revive momentum.
Today’s issue is sponsored by LendingOne—the nation’s fastest-growing build-to-rent (BTR) and SFR portfolio lender for institutional investors.
🎙️ This week on No Cap podcast, Crowd Street’s leadership opens up in a rare interview about rebounding from its fraud scandal while doubling down on tech, trust, and a bold expansion into private markets.
Market Snapshot
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Starts Slump
Multifamily Starts Sink to Lowest Point Since Fall 2024
Despite economic headwinds dragging down construction starts, a modest uptick in permitting offers a glimmer of hope for multifamily developers.
Starts take a hit: In May, US multifamily construction starts fell 30% from April to a seasonally adjusted annual rate of 316,000—the lowest since November 2024, per the US Census Bureau. The drop erased three months of gains, driven by rising interest rates, inflation, and tariff uncertainty.
Silver lining: While starts stumbled, permits told a different story—up 1.4% MoM and 13% YoY in May. The NAHB noted that multifamily start data is historically volatile and cautioned that May’s dip may not signal a lasting trend.
Developers proceed with caution: Publicly traded multifamily REITs expressed cautious optimism in recent earnings calls, highlighting plans to expand development pipelines this year. However, many flagged the White House’s evolving tariff policies as a key concern for project budgeting and feasibility.
Vacancy trends: The national apartment vacancy rate peaked in late 2024 and is expected to decline through 2025. With completions projected to drop 45% amid a shrinking pipeline, tightening supply could boost rents and revive development interest.
➥ THE TAKEAWAY
Start-stop signals: While May’s drop in multifamily starts might alarm some, rising permit activity and falling vacancy rates suggest the fundamentals for long-term development demand remain intact.
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✍️ Editor’s Picks
Capital boost: The long-term (up to 30 years), non-recourse financing tool C-PACE can inject fresh capital into mid-construction deals and projects up to three years post-completion, making it a viable recapitalization option. (sponsored)
Redemption reality: Starwood defends its real estate income trust, clarifying that recent NAV declines stem mostly from $5B in investor redemptions, not performance issues.
Renter profile: A worsening affordability crisis is forcing US renters to delay homeownership, as rising mortgage rates, steep down payments, and stagnant wages push the median renter age to 42.
M&A activity: PwC sees early signs of a CRE M&A rebound, fueled by office conversions, data center growth, and evolving tax policy.
Dry powder: Kayne Anderson Real Estate closed a $1.69B fund, boosting its dry powder to $4.6B for CRE debt and equity plays.
E&C holds steady: Engineering & Construction deal activity has stayed strong in 2025, driven by housing demand and federal spending.
Rate hold: The Fed held interest rates steady for a fourth straight meeting, signaling caution amid rising inflation, softer growth projections, and ongoing geopolitical uncertainty.
🏘️ MULTIFAMILY
Rent dip: Multifamily asking rents dipped 1.7% YoY in May across major US metros.
Tax solution: California’s underused state LIHTC program could help developers close financing gaps and ease the housing crisis.
Campus bet: Morgan Stanley and The Scion Group are teaming up to acquire a $262M student housing portfolio near the University of Mississippi.
Luxury bidding: San Francisco’s high-end rental market is heating up fast, with bidding wars, RTO moves, and AI-fueled relocations pushing rents to new highs.
🏭 Industrial
Industrial evolution: As US trade policy evolves and port markets adjust, the industrial real estate sector is entering a more selective and complex phase.
Rate race: REIT performance in self-storage varies by market, with pricing strategies, scale, and efficiency driving results across major MSAs.
Port expansion: Trammell Crow and MetLife launched 2.3M SF of warehouse space near Savannah, marking phase one of a major logistics center.
Logistics leader: Atlanta ranks among the top three US markets for 3PL leasing, driven by e-commerce and prime Southeast connectivity.
🏬 RETAIL
Brand overhaul: Kirkland’s is rebranding as The Brand House Collective and converting many of its stores into Bed Bath & Beyond Home locations.
Upgrade opportunity: Tova and Shopton Capital acquired a Santa Monica retail site for $5.5M, betting on upgrades and location-driven upside in a resurging market.
DFW deal: Whitestone REIT acquired its 29th Texas asset, aiming to boost value through remerchandising and efficiencies.
🏢 OFFICE
Cap rate compression: Office cap rates fell 10 basis points to an average of 7.34% since February, as office loan volume surged 123% and debt yields rose.
Broadway breakdown: 1440 Broadway has returned to special servicing as low occupancy and debt issues slash its value nearly in half.
Legal lift: Law firm leasing in Boston surged 300% YoY, driven by RTO trends and a wave of upcoming lease expirations.
Foreclosure fallout: Shaya Prager faces a fourth foreclosure at his Minnesota office park, with $36.8M in defaults adding to mounting legal troubles across his $3B portfolio.
🏨 HOSPITALITY
Cost control: Hotel leaders are focusing on tech upgrades, labor retention, and tighter owner-operator alignment to combat rising expenses and preserve margins.
Event prep: Southwest Value Partners is expanding JW Marriott Houston Downtown ahead of the 2026 World Cup.
A MESSAGE FROM CRE DAILY
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📈 CHART OF THE DAY
Evidence of the toughest fundraising climate in three decades: average fundraising timelines have doubled from 9 months during the GFC to 18 months today.
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