“Huge” investor demand for apartments

A version of this article first appeared in the CNBC Property Play newsletter with Diana Orrick. Property Play covers new and evolving opportunities for real estate investors, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large publicly traded companies. Sign up to receive future editions directly to your inbox.

Multifamily market fundamentals are weakening as a historic surge in new supply continues to flow through the pipeline and rental demand recedes. At the same time, investor demand for these properties is also increasing.

As an example, Camden Property Trust, a top 10 multifamily real estate investment trust, quietly began selling its entire California apartment portfolio (11 properties, worth about $1.5 billion) a few weeks ago, and has already generated significant interest.

“There’s a huge demand right now,” Camden CEO Rick Campo told CNBC. “Not two or three, but hundreds.”

Campo said the company wants to focus entirely on the Sunbelt, where 90% of its assets are currently located.

“We think the Sunbelt market will recover, and when it does, which should happen in 2026 or 2027, it will be a better growth market than California, and our long-term cash flow growth, our net operating income growth, will be more concentrated in the Sunbelt than in Southern California. So that’s fundamentally why we’re selling.”

As for timing, he said deteriorating fundamentals are actually stimulating demand.

“Apartment affordability across the country is improving because rents aren’t growing, but wages are growing,” Campo said. “At the same time, if you look back over the past 20 years, the only time apartment rents have been flat for more than a year or two is during really complex recessions or financial crises, so the market basically believes there will be an upturn in the market.”

Rent prices in 2026 started off sluggish, with the national median price dropping 1.4% year over year in January, the largest annual decline since September 2023 and the lowest January rent since 2022, according to Apartment List. Rents are now more than 6% lower than their previous peak in 2022.

Rents are falling because vacancies are increasing. The national vacancy rate in January was 7.3%, a record high in the Apartment List index dating back to 2017. It also took an average of 41 days to rent a room, four days longer than in January 2025 and the highest point in the index.

“Although the peak of the multifamily construction boom has passed, a healthy supply of new units remains on the market, colliding with weak demand, and vacancies continue to trend upwards,” said Chris Salviati, chief economist at Apartment List.

In 2024, more than 600,000 new apartment buildings will come on the market, the most new supply in a single year since 1986. It is expected to decline to 500,000 units in 2025 and further decline in 2026, but is still above average.

“Whether market conditions change will depend on rental demand, but the weak labor market and general economic uncertainty make the outlook for rental demand increasingly volatile,” Salviati said.

However, as fundamentals weaken, investor interest in the sector from both private capital and REITs is increasing. According to Moody’s, multifamily led all real estate sectors in transactions in 2025.

Mark Francesky, managing director of research and securities at Zelman & Associates, called this a “defining conflict.”

Francesky said 12-month trading volumes have increased for 14 consecutive months on an annual basis, despite virtually no change in capitalization rates.

“While we still believe the economy is stable and stable, and the long-term outlook is positive, fundamentals and investors are pointing to the same thing: weakness,” Francesky said.

Berkadia’s 2026 Multifamily Investor Sentiment Study, which surveyed 249 investors to assess expected transaction activity and opportunities within the sector in 2026, found that 87% of investors plan to moderately or aggressively expand their multifamily portfolios in 2026, “exhibiting cautious optimism despite continued challenges.”

Additionally, the majority of investors (59%) expect rental rates in the multifamily sector to increase modestly this year. According to Berkadia research, the Southeast, Midwest, and Texas are projected to be the top regions for multifamily investment due to immigration trends, affordability, and business-friendly policies.

So how do we untangle the disconnect between the seemingly strong appetite of investors to own apartments and the fundamentals of weak demand?

“I think they’re going to get through today’s softness and have a better environment tomorrow,” said Samuel Thurn, managing partner and portfolio manager at Ontario, Canada-based Hazelview Investments, which has $11 billion in assets under management.

“For private companies that have investment capital and have a five- to 10-year lens, they want what the world will look like after 2027 because that’s the time frame that they have in their private funds,” he added.

Mr. Sarn said an expected upturn in household formation and a sharp slowdown in multifamily housing starts will ultimately give landlords more pricing power for both new rentals and renewals.

But Francesky said location (which is, of course, an investment variable in all real estate) will be much more important than usual in the next cycle.

“I would treat the (local) market like a stock. Like the stock market, it’s a market of market pickers. People focus too much on regions and markets,” he said.

Analysts scrutinizing Camden’s exit from California also take into account state regulations.

“The positive is that CPT is focused on a broad range of Sunbelt investments, with less exposure from heavily regulated states,” said Alexander Goldfarb, managing director and senior research analyst at Piper Sandler.

Some have pointed out that the industry has overheated over the past decade and is now overcapacitated, which Campo argues is exactly the case.

“The regulatory structure of the Sunbelt is what drives growth in the Sunbelt. It’s pro-business, it’s a young population, it’s a highly qualified workforce,” Campo said.

Francesky, on the other hand, proposed a different angle to the problem. It is an alternative in this sector, such as senior housing or student housing. Both fall under the category of multifamily housing, and are expected to have a strong future demographic trend, especially for the elderly.

“Everyone has to live somewhere. The real focus is not on growth industries, but on solid management and stability,” he said.