U.S. Multifamily Firms May Be Winners Of The Trade War

The most sweeping tariffs since President Donald Trump took the White House are set to go into force next week. It’s at least the third attempt at imposing the fees, and the president himself may be the only person who really knows if they’ll actually be levied. 

Still, Matthew Sharp, the co-founder of multifamily investment firm Hamilton Point Investments, knows one thing is certain about a trade war.

“This will be really bad for developers, really bad for tenants, for residents, but it’s actually kind of good for people like me and for owners of current properties,” Sharp said. 

The 25% tariffs on construction and automotive products materials were first set to go into effect in early February but were ultimately delayed by the administration under pressure from the business community. It’s not exactly clear what form the April 2 tariffs will take, but the White House has signaled that the new taxes could be narrower than originally envisioned. 

If they lead raw material prices to rise, it will only add to the growing costs that have already brought apartment development volume near historic lows. The lull in new projects gives the sector a chance to absorb the pandemic-era burst of new development, which could lay the groundwork for a sector-wide rebound.

The pandemic fueled a fitful short-term multifamily cycle, Moody’s Senior Economist Lu Chen said. Rising demand during lockdowns in 2021 led to an explosion of new construction, much of which came online last year, adding units to markets and weighing on rent growth. 

“Then it leads us into this current stabilizing phase,” she said. “We're at the tail end of this mini-cycle, and I'm looking at the market to pick up as soon as this oversupply is absorbed.”

Multifamily valuations have been squeezed as operating costs rose faster than rents, putting pressure on owners who had locked in floating-rate debt in the early days of the pandemic and are now contending with significantly higher interest rates. The ballooning costs mean that investors can purchase a recently built apartment building for less than what it would cost to build today.

“That shift from substantial premiums to replacement costs, call it three years ago, to a period right now where we're talking about finances below replacement costs, that’s a dramatic shift,” said Luis Elorza, a Tampa-based principal in Avison Young’s multifamily capital markets group who said he recently closed a deal at a 30% discount to its price to build today. 

“It’s an indication that we're at a very interesting inflection point on values,” he said. “I think we're going to see a dramatic appreciation of multifamily values over the next 12 to 18 months.”

New apartments under construction reached a record 986,000 units in early 2023, according to the National Association of Homebuilders, but the number of new projects dropped dramatically as interest rates rose and record rent growth cooled.

There were 370,000 units under construction at a seasonally adjusted rate in February. For each unit that broke ground, 1.5 apartments finished construction, according to the NAHB. 

CBRE projects that construction starts at the middle of this year will be 74% below 2021 levels and 30% below the prepandemic average. 

“In the last two years, very little has started, and the developers today are saying there's no equity and the debt doesn't even come close to making new construction work,” Sharp said.  

Early indicators suggest that the U.S. multifamily market is absorbing a record level of new units, and tariffs add another hurdle for developers that could stifle construction. The on-again, off-again tariffs have the potential to add between 3% and 5% to commercial real estate development costs, which CBRE analysts said will add enough variability to pricing that some developers will be forced to shelve projects. 

Fewer new developments today translates to fewer available rentals in the years to come, which bullish investors expect to translate into strong rent growth. Early buyers sensing opportunity started making deals last year, with Blackstone spending $10B in April on Apartment Income REIT Corp., better known as AIR Communities, paying a 25% premium on the stock’s value at the time.

Large, well-capitalized investment firms are still the most active players in the market today, but 83% of large and small multifamily investors are looking to add to their portfolios this year, according to a recent survey from Berkadia. There’s a tremendous amount of capital already in the market — Elorza said desirable assets can easily attract more than 40 bids — and more is entering the space each day. 

“Once a lot of these things become more visible, a lot of the great buys are going to be behind us,” Elorza said.

Optimism is also growing on Wall Street, with managers of the country’s largest apartment REITs sounding optimistic on fourth-quarter earnings calls as their concerns about the glut of pandemic-era construction fade.

“We think investors should have exposure to real estate stocks,” J.P. Morgan analysts wrote in a note this week, pointing out that the broader real estate sector was outperforming the markets so far in 2025. Commercial real estate fundamentals are stable, transaction activity is expected to pick up, and stock valuations are reasonable compared to the broader equity market, the analysts wrote. 

In the near term, the analysts see the most upside today in stocks for brokerages, net lease assets, office and shopping center properties because they’re likely to be the first to benefit from a sector bounce back. A strong recovery of residential REITs is possible, but it’s unlikely to fully manifest until next year. The sector is particularly vulnerable to a downturn, according to J.P. Morgan. 

“If resident pushback on rents picks up later this year, the notion of a 2026 rebound could be at risk; we think the 2H improvement and seeing the results in 2026 is a fairly consensus call,” they wrote.

Today’s multifamily investors believe that the shrinking development pipelines lay the groundwork for strong rent growth in a few years. Moody’s is projecting rent growth around 2.5% to 3% in the near term, but Chen said it was likely to accelerate in 2026.

“What we're looking at is below the long-term average, but it’s much higher than what we saw in 2024,” she said.

Collectively, limited new construction, resurgent rent growth and motivated sellers in the market create an opportunity for investors who are optimistic that the impacts from tariffs will be minimal compared to broader resilience in the U.S. economy, Elorza said. 

“We have a lot of liquidity that's waiting to come into the market, and a segment of that liquidity is going to be bullish on the short-term nature of the trade issues that are going on right now,” he said.