Apartment Investment Market Thaws Despite High Interest Rates

As the apartment investment market navigates through 2025, a new normal is emerging, shaped by the lingering effects of high interest rates and evolving economic conditions. Namely, the apartment investment market is experiencing a gradual thaw after years of stagnation, according to Simon Herrmann, SVP at capital advisory firm PearlX. “While investors remember the days of 3% interest rates, there is now a growing acceptance that those numbers aren’t returning anytime soon,” he told GlobeSt.com. This acceptance is spurring increased activity, as investors seek to put their capital to work rather than leaving it idle.

However, the high interest rate era has left its mark on the industry. Projects and purchases made during the last three to four years are facing particular strain. “For many investors, the pro formas prepared in 2021 really didn’t anticipate today’s borrowing costs. That led to strained cash flows and difficult refinancing scenarios,” Herrmann points out.