Near-Term Multifamily Rent Growth Forecasts Upgraded: CSGP Sees Stronger Demand but Vacancy to Hold Steady Through 2026
Multifamily Rent Growth Outlook Raised as Demand Firms Up
CoStar Group (NASDAQ: CSGP) and Apartments.com have upgraded their near-term forecast for U.S. multifamily rent growth, citing firmer leasing trends and improving demand. According to the revised guidance, national apartment rents are now expected to increase by 0.2% in the first quarter of 2026—a notable upward revision of 60 basis points from their previous outlook. This adjustment signals a shift in expectations for the sector, buoyed by improved absorption and resilience in leasing activity amid a backdrop of significant new supply.
The new projections reflect a more optimistic take on rental market conditions for the coming months, even as the sector grapples with the lingering effects of a construction surge and uncertain economic headwinds. While momentum has picked up, CoStar analysts caution that the absorption of excess supply is expected to extend into 2026, keeping vacancy rates elevated in the near term.
Vacancy Rates Remain High, Easing Anticipated in 2027
Despite the uptick in rent growth expectations, CoStar’s forecast maintains a cautious view on vacancy, projecting an 8.5% national vacancy rate through the end of 2026. This figure is unchanged from prior forecasts, underscoring the challenge of absorbing new inventory added during the building boom. The report anticipates a gradual easing, with vacancy rates expected to dip to 8.1% by the end of 2027 as supply pressures wane and demand continues to recover.
| Metric | Previous Forecast | Current Forecast | Change |
|---|---|---|---|
| Q1 2026 Rent Growth | -0.40% | +0.20% | +0.60% |
| Q4 2026 Rent Growth | +1.00% | +0.60% | -0.40% |
| Vacancy (Year-End 2026) | 8.50% | 8.50% | No Change |
| Vacancy (Year-End 2027) | Not Stated | 8.10% | N/A |
Risks Remain Tilted to the Downside Despite Upgraded Outlook
While the rent growth forecast has been lifted for early 2026, CoStar cautions the sector faces a difficult macroeconomic environment. Downside risks persist and are largely driven by weaker expectations for employment growth—attributed to revised U.S. tariff policy, slowing labor force expansion, and productivity gains that allow businesses to increase output with fewer hires. This could dampen demand for apartments over the long run, even as near-term trends improve.
According to Grant Montgomery, National Director of Multifamily Analytics at CoStar Group, “Economists have downgraded employment growth expectations due to significant policy and demographic changes, signaling that risks surrounding the rental market remain firmly on the downside.”
Market Perspective: Supply Glut Prolongs High Vacancies—But Demand Slowly Rebounds
What’s behind this cautious optimism? The sector continues to digest a surge of new supply from a multi-year construction boom. As new units are leased up, landlords nationwide are expected to benefit from gradually tightening conditions starting in 2027. However, persistently high vacancy rates in the interim could weigh on rental income and property values, challenging both property owners and investors to navigate an uncertain landscape in the meantime.
In summary, while the revised outlook paints a somewhat brighter picture for near-term rent growth, CSGP’s forecast reaffirms that the recovery will be gradual, and risks remain. Investors and market observers may want to closely monitor employment trends and the pace of absorption to gauge any early signs of fundamental improvement—or warning signals ahead.
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