As 2025 ended, net absorption of multifamily units was on track for its third strongest year since 2000. More than 102,000 units were absorbed in the third quarter, marking the third straight quarter of more than 100,000 net units absorbed. Fourth quarter estimates are coming in around 55,000 units.
Multifamily absorption measures the net change in occupied apartment units over a given period, indicating whether demand is keeping pace with new supply.
As experts review the final numbers of how many apartment units were newly occupied or leased in 2025 (minus the number that became vacant), many expect this upward trend to continue as deliveries on new construction slow while demand will lower the vacancy rate.
Meanwhile, apartment rents declined across 16 of the top 30 U.S. metros, signaling a shift from previous periods of stability.
When it comes to high absorption rates, landlords and owners will benefit from the in-place occupancy. In turn, rent is expected to soften in the next few quarters.
Market Demographics
Absorption is also highly dependent on market demographics and location coupled with the prevailing headwinds in the single-family home sales market.
The country continues to see a lower level of first-time home buyers as older homeowners hang on to their residences and mortgages with lower interest rates. This, in turn, encourages younger people to rent due to a decreased availability of homes. Property taxes may also indirectly affect multifamily absorption rates. In high property tax areas of the country, people may be more inclined to rent.
Last year’s labor market also affected this year’s outlook on absorption rates. A strong local job market and overall economic growth directly impact consumer confidence and intentions to rent. The Bureau of Labor Statistics noted the year ended with an unemployment rate of 4.6 percent, slightly up from the previous year.
Job losses eliminate potential renters, reducing demands as individuals and families look for ways to save. Many young professionals fresh out of college are still looking for work. As they face on-going economic pressures like housing and student loans, some opt to return to living back home with their parents to stabilize their finances.
Regional Differences
Location continues to matter. For example, Chicago multifamily unit absorption has fared well over the past few years on main transit lines in both the city and suburbs as Gen Z seeks transportation, convenience, amenities and jobs.
Yet, as supply levels increase on new construction, vacancy rates have also in-creased. Slower return to office work policies have also affected Gen Z’s desire to live downtown, and many have explored more affordable rental units and condos in outlying areas.
After years of high absorption rates, some urban areas are seeing rebalancing with an increase in vacancies. The national capital region, including Washington, D.C., was hit hard with federal government layoffs last year.
Agencies based in D.C., like the Environmental Protection Agency, Department of Education and NASA saw significant cuts to their workforce. While U.S. Office of Personnel Management (OPM) data indicate more than 317,000 federal employees left the government this year (68,000 were hired), the precise number in the national capital region has not been released. Nonetheless, landlords are feeling the effects as leases expire, and workers look for new opportunities outside government and the D.C. beltway.
Even if they have jobs, some people remain spooked by the recent layoffs and furloughs and are looking at ways to cut back, including how much they spend on rent. Facing increasing vacancies, landlords may offer concessions to attract new tenants, like one month of free rent with a one-year lease. They may also lower rental rates to increase occupancy.
Some areas in the South continue to fare well with absorption. San Antonio, for example, has a strong job market and population growth. Other cities in Texas, like Austin, Houston and the Dallas-Fort Worth area, have a much higher supply of empty multifamily housing units, and landlords in turn are offering concessions and discounts.
Many cities in Florida, Arizona and North Carolina are riding the high absorption trend. Miami, Tampa and Orlando are attracting more residents with an increase in job opportunities, while the Phoenix metro region is seeing a boom in construction coupled with an increase in population and a diversified economy.
The Raleigh-Cary metro area continues to see record demand for multifamily housing as the Research Triangle region enjoys an explosion of jobs in tech, life sciences, healthcare and manufacturing logistics.
The multifamily housing market is also affected by low barriers to entry that drive development decisions. If it’s easier to build with fewer zoning restrictions and favorable financing, developers are more likely to build. A recently decreased regulatory environment may also encourage building, but there’s at least a three-year lag time from architectural conception to completed units available for occupancy.
What Can we Expect in 2026?
We will likely continue to see an increase in positive absorption rates in the new year. There will still be metro areas that stall, reflecting regional changes to the job market and demographic trends. The overall economy will also remain a factor, as will interest rates and tariffs affecting construction supply chains.
One challenge the industry continues to face is a lack of affordable housing, with a national shortage of affordable housing estimated to be between 4 to 6 million units. An unintended consequence of building higher-end condos and luxury units is the impact on lower-end housing. To address the affordable housing issue, developers will need to look at creative financing while maximizing national and regional tax incentives.
2026 also has a lot of unknowns that will continue to impact absorption rates of multifamily units, including on-again/off-again tariffs, persistent inflation, an overall decrease in new construction, a recent uptick in unemployment and pessimistic consumer sentiment. But these same variables could also quickly shift in the other direction and continue to spur strong absorption trends in 2026.
Brent Maier is the national real estate advisory leader with Chicago-based Baker Tilly’s development and community advisory practice.