New Apartment Report From ALN

ALN Apartment Data published a new national report this week. It's hot of the press. Two major developments have defined the multifamily sector this year, and both have been widely felt. The first, a deceleration in new apartment supply, was anticipated as the 2024 construction boom reached its peak. The second, a broad resurgence in apartment demand, has exceeded nearly everyone’s expectations.

While the slowdown in new deliveries was written into the forecast, the scale and breadth of the demand recovery have caught the industry by surprise. This is not just a rebound — it’s a synchronized surge across asset classes, market tiers, and regions.

Through September, over 580,000 net new units have been absorbed nationwide. That’s more than double last year’s total through the same point in time and just shy of the exceptional 2021 figure.

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Episode Transcript

(00:01):
Welcome to the Real Estate Express, a podcast, your morning
shot of what's new in the world of real estate investing.
I'm your host, Victor Minash. On today's show, we're
showcasing a report that was published yesterday, October the
8th by ALN Apartment Data. This is their multifamily market
update for 2025 and some surprising conclusions. 2 Major
developments have defined the multifamily area this year, and

(00:23):
both have been widely felt. The first is a deceleration in
new apartment supply, and that'sbeen widely anticipated since
the construction boom last year reached its peak.
Second is a broad resurgence in apartment demand, and that's
exceeded nearly everyone's expectations, including mine.
While the slowdown in new deliveries was written into the
forecast, the scale and breadth of the market demand recovery

(00:45):
has caught the industry by surprise.
It's not just a rebound, it's a synchronized surge across asset
classes, across market tears andacross regions.
Through September of this year, over 580,000 new units have been
absorbed nationwide. That's more than double last
year's total through the same point in time and just sigh of
the exceptional absorption in 2021.

(01:08):
Coming into the year, most analysts expected incremental
improvement in demand may be a modest continuation of 2023
gains. But instead we've witnessed a
market that has been reignited, one that is rivaling record
setting absorption that we saw in the post pandemic era.
So if we step back, the year over year absorption picture is
even stronger. More than 600,000 units were

(01:30):
absorbed nationally in the 12 months ending in September.
That's more than twice the pace of the prior year and second
only to 2021 among the last fiveyears.
And what makes this sustained uptrend remarkable is the
resilience amid all of the uncertainty that we're seeing.
The economic and geopolitical volatility have been constant.
We've got a cooling global economy.
We've got inflation jitters, we've got trade wars.

(01:53):
We've got a political stalemate.We are shrinking population as
people are being deported and fewer people are entering the
country as new immigrants. When we put all of this
together, there's a bunch of fundamentals that are quietly
aligned to support rental housing.
First, the single family resale market remains pretty much
gridlocked. Wage growth, after years of
stagnation has turned positive in real terms.

(02:14):
And the labor market definitely,while showing some cracks,
remains tighter than average. And then we have to remember
that there was unfulfilled demand in 2022 and 2023, and
that's finally materializing. So most importantly, this
recovery has been widespread. It's not confined to one asset
class or one geography. So let's start with Class A.
Among the four price classes, Class A properties have

(02:35):
absolutely led the charge, and that's where, of course, all the
new product is. In the past 12 months, there's
been more than 165,000 units absorbed as surpassing the
performance of 2021, with just over 135,000 units taken up in
that year. That kind of strength is exactly
what the sector needs, and with new supply still working its way
through lease up phases, that solid demand at the top of the

(02:56):
market help stabilize fundamentals and prevent
overhang. But the story doesn't end at the
top of the food chain. Class B and Class C also
delivered exceptional results with year over year absorption
more than doubling the prior year period.
Both of these segments, this year's totals failed only 2021
and it's reflecting A healthier rental activity in the mid
market space. The real surprise came from the

(03:19):
Class D segment, that lower end of the market that's been
struggling for traction since the 2022 downturn.
Earlier this year, there were signs of life, but expectations
were cautious. So Fast forward to today, Class
D absorption has hit nearly 60,000 units in the past 12
months. That compares with fewer than
10,000 units the year before. That improvement signals that

(03:40):
even the most affordability constrained tenants are
continuing to return to the market, a critical indicator of
broad based economic participation.
Let's look next at different size markets, from the largest
markets to the smallest micro markets, every marketeer shared
in the recovery. The tertiary markets have been,
in fact, the standout in this year's report.

(04:01):
Over the past year, roughly 85,000 units were absorbed in
tertiary markets, 3 times last year's level, and it's the
strongest figure in the last five years.
That expansion was concentrated mostly in the Sunbelt.
That continues to attract population and employment
growth. Of course, the primary markets,
those are the big demand engines.
They've done exactly what we'd expect in a rebound cycle.
Nearly 400,000 units were absorbed in the past year, more

(04:23):
than doubling the previous annual tally and its ranking as
the second highest total in the last five years.
Then in the secondary markets, they were also strong, with over
70,000 units absorbed through September of this year.
And again, the Sunbelt dominatedthe leaderboards.
But interestingly, Saint Louis and Grand Rapids made it into
the top 10 sign. That's not just a Southern
story. Even micro markets improved with

(04:45):
about 13,000 units absorbed. Volume is small, of course, but
the growth rate exceeded 50% year over year, making it the
best performance of the last five years.
So quite simply, the improvementis universal.
It's across price points, it's across market sizes and it's
across geographies. So the two dominant narratives,
declining deliveries and surgingdemand, were both expected, but

(05:06):
not at this magnitude. And what's particularly
encouraging is the 2025 strong absorption didn't come as an
isolated rebound. It's also worth noting the
breadth of the recovery. It's every class from luxury to
affordable. All of them have seen
improvement. It's in every region from
primary metros to micro markets.Of course, there still is
uncertainty as we look forward there.
You've got the labor market showing definite signs of

(05:28):
softness. We've got inflation remaining
volatile because partly because of the trade wars.
We've got global trade and geopolitical risk.
And of course, there are fewer units of supply coming into the
pipeline. And that could paradoxically
slow absorption, of course, because they can't can't absorb
units that don't exist. So for both investors and
developers, message is nuanced but optimistic.

(05:49):
The market that appeared to be oversupplied is in fact
normalizing. We've got robust demand and the
occupancy metrics are improving.That is good news for the sector
as a whole. So as you think about that, go
and get a copy of the ALN report.
I'm curious to see if some of the other reports from Costar
and Fannie Mae are going to mirror the same results as you
think about that, Have an awesome rest of your day.

(06:10):
Go make some great things happenand we'll talk to you again
tomorrow.