Steadier conditions will prevail in this year's shifting multifamily investment market as new inventory creates investment opportunities. The asset class's transaction activity gained momentum last year, but buyers have been steering clear of Class B and Class C assets in recent years, according to Northmarq’s 2025 national outlook.
Multifamily transactions increased by 11% year-over-year across the country, but they remain about 50% below peak levels a few years ago. The increase was driven almost entirely by greater activity in the Class A space, many of which are being purchased in all-cash transactions, according to Northmarq. Class A property sales were up 20% from 2023 to 2024, with a median sales price of $227,000 per unit and average cap rates of 5.35%.
Meanwhile, Class B properties enjoyed a modest uptick in transaction counts in 2024, and Class C ones were essentially flat. Class B sales averaged $235,000 per unit, and cap rates averaged 5.4% last year.
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“These segments of the market were expected to account for higher volumes in 2024, as properties that had been acquired using short-term, floating rate debt during the runup were expected to become available as distressed sales,” said the report. “While many major markets have recorded a handful of distressed transactions, the numbers have fallen far short of the capital that was raised in anticipation of acquiring them.”
Instead, many lenders have worked with borrowers to extend terms rather than forcing sales, according to Northmarq. Elevated absorption numbers and the overall economy's health have supported these efforts, as older vintage assets have largely maintained recent occupancy levels and rents, even while falling short of the financial performance used during acquisitions in 2021 and 2022, said the report.
The rate of transactions involving newer assets has lagged in prior periods. Properties built between 2022 and 2024 sell at about half as much as ones built between 2019 and 2021. However, these newer assets will likely increase sales volume as properties lease up and the development pipeline thins, said Northmarq.
Prices have trended lower in recent years due to rising operational costs and flat rents dragging on property cash flows. Higher interest rates have also contributed.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
