Multifamily Market 2025: Where the Market is Headed and How Savvy Investors Can Win

Feb 25

4 min read

Denver and Colorado Springs real estate market

The Multifamily Market is Shifting—Here’s What You Need to Know

After years of rent growth and high demand, 2024 marked a correction phase for multifamily real estate. A massive wave of new supply, rising expenses, and higher interest rates put pressure on landlords, driving vacancies higher and rent growth to a standstill in many markets.

While this has caused short-term challenges, it has also created some of the best investment opportunities in years—especially for well-capitalized buyers who can weather the turbulence.

In this post, we’ll break down:

National multifamily trends and where the market is heading
How Denver and the Front Range are positioned for recovery
Why Colorado Springs is quietly becoming a great opportunity
How ZB3 Real Estate is navigating this market to create value for investors

If you’ve been looking for a window to enter the market at a discount, now is the time to start paying attention.

Understanding the Bigger Picture: National Multifamily Trends

Supply Has Peaked—And That Matters

530,600 new units were delivered in 2024, the highest annual total in decades.
This led to national vacancies hitting 8.9%, the highest since 2000.
The good news? Developers are already pulling back. New construction starts fell 40% from peak levels, meaning the flood of new supply will taper off by 2026.

Rent Growth Slowed, But It’s Not Dead

Rent growth dropped to just 1% nationally in 2024, a sharp slowdown from the 9-10% annual growth seen in 2021-2022.
The Midwest and Northeast saw rent increases, but overbuilt Sun Belt markets like Denver, Austin, and Phoenix posted declines.
Rent growth is expected to return by late 2025, especially in cities where new development is slowing.

One of the Biggest Opportunities: Loan Maturities & Distressed Deals

$769 billion in multifamily loans are set to mature between 2025-2027.
Many of these loans were underwritten when interest rates were 3-4%—now they’re 7-8% or higher.
Insurance costs, taxes, and operating expenses are also up, and in some markets, rents have flattened out, making it difficult for overleveraged landlords to refinance.
The result? A wave of distressed properties hitting the market. This creates an opportunity to buy great assets from motivated sellers at a discount.

The Takeaway:

✔ The worst of the oversupply is behind us, and demand is still strong.

✔ Savvy investors will capitalize on distressed deals as struggling owners offload properties they can no longer afford to hold.

✔ Now is the time to be looking for long-term plays at reduced pricing.

Denver & The Front Range: Temporary Challenges, Long-Term Strength

A Historic Supply Surge, But That’s Ending

Denver saw an all-time high of 18,400 new units delivered in 2024, pushing vacancies to a record 11.1%.
Colorado Springs hit a 14.7% vacancy rate, one of the highest in the country.
Despite this, absorption remains strong—Denver absorbed 9,000 units in 2024, proving demand is still there.

Rents Took a Hit, But Are Starting to Level Off

Denver rents declined 2.7% year-over-year, marking the first drop since the Great Recession.
Luxury apartments (Class A) suffered the most, especially in Downtown (-4.8%).
Workforce housing (Class B & C) has remained more stable, showing that demand is still strong for more affordable rentals.

Investment Volume is Rising—A Sign That Smart Money is Moving In

Denver’s multifamily investment volume jumped 60% in 2024, hitting $5.0 billion.
Cap rates remain stable at 5.4%, suggesting investors see a path to recovery.
Price-per-unit is down 9.9%, creating better buy-side opportunities.

ZB3’s Take on Denver

✔ We’re focusing on buying Class B & C properties in stable submarkets, where demand is strongest.

✔ We’re targeting properties where we can add value, either through management efficiencies, light renovations, or repositioning.

✔ We’re staying away from high-end luxury properties, which are struggling the most.

Colorado Springs: The Overlooked Opportunity

On paper, Colorado Springs looks like a tough market right now—high vacancies, soft rents, and an uncertain near-term outlook.

But here’s why it’s worth watching:

📌 Demand is still positive—vacancies are up because supply is outpacing absorption, but people are still renting.

📌 New construction is already slowing, meaning excess inventory will get absorbed over the next 12-24 months.

📌 The city is seeing major investments in defense, aerospace, and tech, which will drive rental demand in the coming years.

ZB3’s Take on Colorado Springs

✔ We’re monitoring for distressed sales, where we can buy at a discount and hold until the market recovers.

✔ Workforce housing is key—demand for affordable rentals remains strong especially in downturns.

✔ We believe the market will correct by 2026, and those who buy in now could see great appreciation over the next five years.

How ZB3 is Navigating the Market for Investors

Managing High Vacancies

We partner with top-tier property managers to ensure fast leasing and effective marketing. We also maintain strong cash reserves so we can ride out temporary dips without being forced to sell.

Financing Challenges? Not an Issue

We’re buying incredible deals with strong fundamentals and working with trusted mortgage brokers to find the best financing options. We make sure our expenses are easily covered after stabilization, even if rent growth stays slow for years.

Rent Softness? We’ve Already Accounted for It

We’re assuming conservative rent growth in all our underwriting, so if rents rise, that’s a bonus—not a necessity.

Final Thoughts: The Best Time to Buy is When Others Are Scared

The multifamily market is transitioning, and the best opportunities are emerging in places where others are uncertain.

✔ Denver and Colorado Springs are nearing their turning points, and those who buy now will be positioned for big gains by 2026-2027.

✔ Loan maturities are creating distressed sales, which will allow well-capitalized buyers to pick up assets at deep discounts.

✔ ZB3 is focused on value-add, cash-flowing assets in strong submarkets, ensuring our investors see solid returns even in a slow market.

📩 Want to invest? Reach out today to learn about our next deal.

References

📌 CBRE Q4 2024 Multifamily Report

📌 Yardi Matrix Denver Multifamily Report (Jan 2025)

📌 Cushman & Wakefield MarketBeat Q4 2024

📌 Cushman & Wakefield Denver MarketBeat Q4 2024

📌 Newmark Q4 2024 Capital Markets Report 📌 Marcus and Millichap Denver Multifamily Market Report