The Real Story of 2025: Rents, Rates, and the Road to Recovery

1. Why Hasn’t the Multifamily Recovery Yet Materialized?

SURVIVE IN 2025 > FIX IN 2026 > HEAVEN IN 2027

Headwinds: Some owners are “buying occupancy” with rent cuts, leading to lower net operating income (“NOI”) and compressed values.

At the start of 2025, most owners and developers expected this to be the year of recovery after record multifamily deliveries in 2024. In their view, recovery meant two things: interest rates coming down (which they haven’t — and Forum doesn’t believe they will) and new lease signings outpacing new construction (which they have). So where did they go wrong? The answer is rental rates. What was thought to be a year of recovery has instead become what we call “Survive in 2025.”

Interest rates — both floating and fixed — remain far above expectations, directly pressuring cash flow and property values. To avoid capital calls and loan rebalancing, many developers are “buying occupancy,” accelerating lease-ups with two to three months of free rent just to reach break-even debt service.

It’s a double whammy, and in some cases, a death spiral, for highly leveraged owners who bought occupancy through concessions. Those rent giveaways are pulling renters up from B- and C-class properties into discounted A-class units — not new demand, just renters shifting up the chain and leaving older assets more exposed. With NOI down and loans coming due, many owners now face the “oh sh*t” moment of impaired or wiped-out equity.

The real story is that lower rents, not just higher rates, have driven this value decline. Everyone expected a recovery from falling rates, not falling rents. As we move into 2026, concessions will take time to burn off, keeping values suppressed even as debt matures. That combination creates both the problem and the opportunity — pain for current owners, but attractive entry points for buyers with capital.

As supply moderates and absorption improves, we expect the next phase — “Fix in 2026” — to take shape. Reduced concessions, lower vacancy, and renewed investor confidence should lay the foundation for the next recovery cycle — what we’re calling “Heaven in 2027.”

As the real estate market continues to evolve, Forum remains committed to providing insights that help investors navigate opportunities and challenges ahead. Real estate cycles tend to follow recognizable patterns, and as we analyze market data and engage with industry peers, several key themes are emerging for the year ahead.

2. What are you Waiting For?

POSITIONING FOR OPPORTUNITY 

Tailwinds: Demand is clearly outpacing supply, new construction starts are at historic lows, and homeowners with 3% mortgages aren’t leaving for 7%—all of which support strong long-term multifamily fundamentals.

It’s a fair question — and one we’ve asked ourselves as well. The short answer: discipline and capital.

We haven’t made a new acquisition in nearly five years — and that restraint was deliberate. For much of that period, valuations simply didn’t make sense relative to fundamentals. We refused to chase deals that didn’t fit our return profile or investment philosophy.

Today, we believe that patience is starting to pay off. Redemptions have stabilized, capital is flowing back into real estate, and many owners are facing refinancing challenges with debt maturities coming due and limited equity capacity. These conditions are creating the kind of value-driven opportunities we last saw after the Global Financial Crisis — moments when disciplined capital can make a real difference. I have not seen this kind of opportunity in 30 years. We can buy brand-new, high-quality assets at discounts of 25% or more. The time is now, and our pipeline is robust.

At Forum, we continue to expand our investments across development, equity, private credit, and debt strategies to help investors capitalize on these evolving trends. In this piece, we take a deeper dive into the market forces we see shaping 2025 and how Forum is positioning for the opportunities ahead.

3. Where Do We See Opportunity From Here?

So, while the short term might feel tight, everything we’re seeing points to a much stronger setup for 2026 and 2027 — if you have staying power. The lesson from 2009 still holds true: if you’re playing defense, you can’t play offense. We’re leaning in right now, on offense. We don’t have problems — other than needing more capital to go buy.

At Forum, we believe the next 12 to 24 months represent one of the most compelling acquisition environments in more than three decades. Many developers are already approaching us as their debt maturities near — and remember, we’re a lender too —which is creating a steady pipeline of opportunities to buy. With limited equity capacity across the market, this environment is setting up exactly as Forum hoped: a window to acquire brand-new, high-quality assets at attractive basis levels.

We at Forum are looking forward to a busy 2026 as real estate markets continue to evolve and we are excited to share our thoughts with you here. Forum’s philosophy hinges on understanding and anticipating real estate market cycles, which typically follow predictable patterns influenced by supply and demand fundamentals such as occupancy rates and rent growth, as well as capital markets involving the cost of capital and market pricing. Over four years ago, when we recognized that historically low capital costs were set to likely rise and that new supply would challenge NOI growth, Forum made a strategic decision to avoid equity markets. Instead, the firm shifted its focus to debt investments, aiming to capitalize on rising interest rates and enhance return potential. Today, while high interest rates continue to support our debt investment strategy, we see capital costs as peaking and demand poised to outpace supply. As such, as we look ahead into 2026, Forum anticipates a market shift back towards equity investing even as the lending opportunity continues.

THE MAIN TAKEAWAY IS SIMPLE:

“SURVIVE IN ’25, FIX IN’26, AND HEAVEN IN ’27.” WE’RE POSITIONING OURSELVES THOUGHTFULLY TO MAKE SURE WE’RE ON THE RIGHT SIDE OF THAT CYCLE.

While Forum’s activity in Q3 was intentionally measured, we anticipate taking a more active posture in Q4 and early 2026, pursuing opportunities selectively and in partnership with experienced operators.