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Tariffs Turn Apartment Oversupply Into a Windfall for Developers
Developers who built during the 2023–2024 boom now benefit from completing projects before a fresh round of tariffs drives up material costs.
Jordan B.
April 16, 2025
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Good morning. Turns out that overbuilding wasn’t such a bad move. With tariffs set to drive up construction costs, developers who built early are now positioned to benefit as supply tightens and rents rebound.
Today's issue is sponsored by InvestNext—learn how the homeownership gap is reshaping rental demand.
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Market Snapshot
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LUCKY BREAK
Tariffs Turn Apartment Oversupply Into a Windfall for Developers
A wave of pre-tariff overbuilding may have inadvertently set multifamily landlords up for a rental market rebound.
Fortunate timing: The multifamily industry is finding a silver lining in what was once viewed as a glut of supply. The industry delivered over 1.1 million units in 2023–2024—the biggest supply surge since the '80s—just before tariffs and labor shortages hit. What once pressured rents now buffers landlords from rising construction costs.
Renters staying put: High mortgage rates (still over 6.5%) and home prices roughly one-third more expensive than renting are keeping would-be buyers sidelined. In markets like Manhattan, net effective rents have hit record highs as tenants renew rather than buy.
Supply squeeze: With new construction slowing and inventory expected to be absorbed by year-end, landlords are forecasting rent hikes of up to 5% annually. Firms like Northwood Ravin, once reliant on concessions, now see stronger pricing ahead.
Builders hitting pause: Homebuilders still in motion face higher costs. Over 25% of U.S. residential building materials come from China, where Trump’s proposed 145% tariff could drive delays and squeeze already tight housing supply.
Not everyone benefits: While apartment developers may benefit, homebuilders still in progress are bracing for rising costs tied to tariffs and labor shortages. At the same time, renters face limited options and rising lease renewals, with homeownership remaining around 30% more expensive than renting.
➥ THE TAKEAWAY
Big picture: What started as an oversupply headache is turning into a strategic advantage for multifamily owners. With fewer competitors building and renters less inclined to buy, developers who got in early may ride out the tariff era with a pricing tailwind.
TOGETHER WITH INVESTNEXT
Only 27% of Americans Can Qualify for a Mortgage—What This Means for Multifamily
The homeownership gap has reached a 15-year high, with monthly ownership costs exceeding rent by 25%.
Our comprehensive analysis shows how this fundamental shift impacts occupancy, rental growth, and investment strategy across different markets. Discover which regions benefit most from this structural change.
*This is a paid advertisement. Please see the full disclosure at the bottom of the newsletter.
✍️ Editor’s Picks
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Not so safe: The recent surge in bond market volatility and shifting foreign holdings of US Treasuries are stirring doubts about the enduring status of American assets as global safe havens.
Upstate bites: Upstate NY’s culinary scene is booming this summer, with high-profile restaurant and bakery openings drawing food lovers to the Hudson Valley.
Budget burnout: With credit card delinquencies rising, confidence plunging, and inflation expectations surging, US consumers are hitting a financial wall.
Bank exodus: As digital banking surges and traditional branches vanish, landlords often celebrate since freestanding bank closures open doors for higher-paying tenants in prime retail locations.
🏘️ MULTIFAMILY
Affordability gap: The income gap between buying and renting a home has widened to a record 82%, highlighting how high prices and mortgage rates continue to shut out would-be homeowners.
Campus crunch: As the Bay Area’s luxury housing market surges on tech wealth, local community colleges are building desperately needed student housing amid soaring rents and limited supply.
Pricing probe: Washington’s attorney general is suing RealPage and nine major landlords, alleging their use of revenue management software artificially inflated rents and violated consumer protection laws.
Bay backing: Stockbridge Capital and Wilson Meany secured a $170M refi for their 390-unit apartment portfolio in San Mateo’s Bay Meadows, signaling renewed confidence in the Mid-Peninsula multifamily market.
🏭 Industrial
Data onshoring: Amid escalating tariffs and global supply chain pressure, Nvidia is bringing AI supercomputer production stateside, launching over 1 MSF of manufacturing in Texas.
Demand dip: Industrial net absorption in CA’s Central Valley plunged to a near decade-low in Q125, driven by large sublease offerings and subdued tenant demand.
Lifestyle logistics: To attract and retain increasingly selective workers, warehouse developers are transforming industrial spaces with amenities like pickleball courts, food halls, day care, and walking trails.
🏬 RETAIL
Luxury shakeup: LVMH lost its crown as the world’s most valuable luxury firm to Hermès after a surprise Q1 sales drop triggered a sharp stock plunge.
Pro move: Lowe’s is acquiring Artisan Design Group for $1.3B to deepen its reach with professional contractors, aiming to keep pace with Home Depot’s big-ticket strategy.
Value play: Onyx Equities has sold the renovated, grocery-anchored Hazlet Town Center in NJ for $44M, marking a successful value-add exit after nearly doubling its 2016 investment.
🏢 OFFICE
Conversion capital: Developer Don Peebles and ex-Carlyle partner Doug McNeely have launched Donahue Douglas, aiming to raise $1.5B to convert struggling office buildings into housing.
Tower trouble: An NY lender has foreclosed on Atlanta’s 2000 RiverEdge Place office tower with a staggering 70% value drop, reflecting deepening distress in the city's suburban office market.
DTLA distress: The $128M CMBS loan on DTLA’s Wedbush Center has been transferred to special servicing after owner Cerberus Capital missed its March maturity.
Foreclosure filing: Ruben Espinoza’s River North office portfolio is facing foreclosure after he defaulted on a $9.6M loan and accrued nearly $1M in fees.
🏨 HOSPITALITY
Luxury listing: Alexico Group is weighing a $1B offer for The Mark Hotel, its ultra-luxury Upper East Side property known for celebrity guests and sky-high penthouse rates.
Points power: Hotel loyalty programs continue to deliver strong occupancy gains and ROI, with 2024 membership rising 14.5% and loyalty-driven stays accounting for over half of all room nights.
⭐️🛠 TOOL OF THE DAY
Read CRE Daily’s comprehensive review of Enaia, a commercial real estate CRM and workflow platform designed specifically for CRE brokers.
📈 CHART OF THE DAY
Source: CBRE Econometric Advisors, Q1 2025.
Private credit markets showed mounting signs of stress in 2024, with a sharp rise in loan valuation write-downs as higher interest rates strained borrower repayment capacity—especially for floating-rate debt. Senior loan distress-level write-downs have nearly tripled since 2022, and more than 5% of senior loans and 12% of mezzanine loans saw values slashed by half. While restructurings haven’t spiked yet, the deepening repricings suggest many loans are inching closer to that threshold.
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