Forum's Q2 2025 Market Update

Market Commentary

As we close out Q2 2025, we see a market performing about as we have been expecting. Multifamily demand remains strong and improving while supply continues to fall off, as we describe in detail below. As such, we believe multifamily apartments have become a favored asset class even as access to capital remains limited by investor liquidity¹. We continue to believe that the current multifamily fundamentals present a compelling foundation for strong performance across Forum’s equity and debt strategies and we look forward to partnering with you to capitalize on this opportunity.

U.S. Macro Economy

At the time of this writing, while ongoing risks—from geopolitical tensions abroad to policy uncertainty at home—continue to cast a shadow over the U.S. economic outlook, the tangible impact of these threats has, for the moment, remained limited. Despite an environment characterized by volatility and caution, key indicators suggest a resilience in the market that has allowed fundamentals, particularly in the multifamily sector, to remain on solid ground. Against this backdrop, we continue to monitor developments carefully, recognizing that vigilance is warranted even as stability persists.

In the near term, tensions remain high in the Middle East as first Israel, and then the U.S., struck out at cross-border threats. These actions created risks for crude flows including access to the Strait of Hormuz where nearly a fifth of the world’s crude passes through. But attacks on Iran’s nuclear program have so far spared its energy infrastructure, and oil prices along with it².

Closer to home, the Administration’s July 9 deadline for international trade deals will have high stakes for the global economy and America’s relationships with allies and adversaries, with investors and foreign governments uncertain about Trump’s next moves. That said, it appears that these new arrangements could lack specificity in the near term, allowing the Administration to modify the terms to minimize impact on the U.S. economy³. As such, investors have been taking the uncertainty in stride. U.S. stock futures recently rose⁴, the dollar resumed its decline and the U.S. Treasury market is wrapping up its best monthly return since February.

Whatever the final terms, tariffs might raise construction costs. Material pricing could rise for builders heavily relying on impacted materials (i.e., materials from China and Canadian lumber). As the U.S. relationship with China has been showing signs of strain, many builders (and their vendors) began shifting some of their supply chains outside of China in 2018-19⁵.

While the Federal Reserve (“the Fed”) remains in the spotlight, it has so far held short-term rates steady, citing persistent inflation risks as justification for resisting pressure from the Administration to begin cutting. However, the Administration may still get its wish: the seemingly muted inflationary impact of recent tariffs has led some market observers to call for at least modest rate relief later this year⁶.

Real Estate

The prospect of falling interest rates is, of course, welcome news for real estate broadly—if not especially for the multifamily sector. Interest rates play a fundamental role in shaping the cost of financing across commercial real estate investments. The prospect of lower interest rates often increases transactions and refinancing volumes and can lead to higher property valuations⁷.

For real estate investors, we believe potential rate changes could catalyze a rotation of capital out of the public markets and into private real assets. Since its October 2022 trough, the S&P 500 has advanced nearly 50%, surpassing 6,000 by the end of June 2025⁸. In contrast, the RCA CPPI (Real Capital Analytics Commercial Property Price Index) all‑property index remains roughly 15–20% below its 2022 peak. This widening relative‑value gap positions real estate for potential capital flows into commercial real estate⁹.

Foreign investors even see the opportunity. This while Administration policies and rhetoric have caused a current pause in U.S. investing. A recent sentiment survey by the Association of Foreign Investors in Real Estate polled representatives from 25 countries and 180 investment organizations globally and found that two-thirds expect to expand their U.S. multifamily holdings even as multifamily represents the primary holding of 50 percent of respondents¹⁰.

Multifamily Outlook

As for apartments, demand remains historically strong. Several statistics bear this out but two of the most telling focus on the growing number of renters, and their options. The growing number of renters is a function of more people living independently of one another—household formation. More households equal more renters. And households are growing¹¹.

But new households have a choice of whether to own or rent their housing. The cost of homeownership has grown out of reach for many. The statistics suggest that the economy is driving them towards renting.

Supply Falling

Meanwhile, as an increasing number of new households are pushed toward renting, they are finding fewer choices. Rising interest rates put the brakes on new construction. As a result, the first quarter produced the fewest new construction starts in over a decade.

When higher demand chases lower supply, we typically see a faster take-up of apartment availability, and that is just what is happening here. In 2025, the numbers reflect our expectations for this year and apartment leasing velocity has increased significantly.

The Opportunity

We believe current supply and demand fundamentals in the U.S. are creating conditions for potentially historically strong rent growth. A natural question is whether apartment renters can absorb higher rents. Encouragingly, the data suggest they can: the average U.S. renter has the financial capacity to support the higher rents we anticipate.

We believe that the longer-term equity opportunity also creates a near-term opening on the debt side. Slower supply growth should support commercial real estate fundamentals and enhance borrower credit quality on existing loans. Meanwhile, traditional banks have been retreating from commercial real estate lending for several years—especially since mid-2023¹²—leaving room for private capital to step in.

While we believe the future looks bright, today’s entry point is equally compelling. As noted earlier, elevated construction financing costs have curbed new starts, but that’s only part of the story. Rising material and labor costs are adding further pressure. Completions across all property types peaked in 2024, and we expect a meaningful slowdown through 2027¹³. We believe this backdrop has the potential to present Forum investors with a compelling multi-year investment window.

Summary

Amid a landscape where interest rates have risen sharply and now appear to have stabilized, the U.S. multifamily market is experiencing unprecedented supply constraints as new construction lags demand. This imbalance has accelerated apartment leasing activity and fueled expectations for strong rent growth, especially as wage gains continue to outpace rent increases for many renters. With banks tightening lending and construction costs remaining elevated, opportunities abound for both equity and debt investors. With reduced supply expected to support property values and borrower credit quality in the years ahead, we believe Forum is well-positioned to deliver access to these opportunities for its investors.

¹ Source: Jay Parsons, “U.S. Multifamily Update & Outlook”, May 2025.
² Source: Bloomberg.com, “Oil Plunges as Iran Response to US Strikes Spares Energy Assets,” by Mia Gindis and Alex Longley, June 22, 2025.
³ Source: Bloomberg.com, “Trump Deals Poised to Fall Short of Sweeping Trade Reforms,” by Catherine Lucey and Jenny Leonard, June 29, 2025.
⁴ Source: Bloomberg.com, “S&P 500 Climbs at End of Best Quarter Since 2023: Markets Wrap,” by Rita Nazareth, June 29, 2025.
⁵ Source: Jay Parsons, “U.S. Multifamily Update & Outlook”, May 2025.
⁶ Source: Bloomberg.com, “Goldman Sachs Pulls Forward Fed Rate-Cut Forecast to September,” by Michael Mackenzie, June 30, 2025.
⁷ Source: Altus Group Limited, “The Debt Capital Markets Survey,” April 1, 2025.
⁸ Source: Yahoo!Finance.com
⁹ Source: MMG Market Insights Report, “Capital Rotation from Equities to U.S. Commercial Real Estate – Historical Patterns & 2025 Outlook,” May 2025.
¹⁰ Source: Mult-Housing News, “Despite Turmoil, Foreign Buyers Can’t Resist U.S. Multifamily,” April 23, 2025
¹¹ Source: Newmark, “Q125 United States Capital Markets Report,” April 2025.
¹² Source: GreenStreet, “Navigating Current State of CRE Debt Markets,” May 13, 2025. 2
¹³ Source:YardiMatrix, “National Multifamily Report,” April 2025.

IMPORTANT DISCLOSURES

This market update is intended for informational purposes only, does not constitute investment advice or a recommendation, and should not provide the basis for any investment decision. Investments in such transactions noted within this newsletter will be made solely by means of offering materials provided to the recipient by Forum or its affiliates. This material does not constitute a part of the offering materials.

Investment in any transaction involves a high degree of risk, and investors should not invest in such transaction unless they can afford to lose their entire investment.

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FORWARD-LOOKING STATEMENTS

This newsletter contains certain forward-looking statements that are based on current expectations (but which are not based on any prior operating history). In light of the numerous factors that can materially affect results, including those set forth in this newsletter, the inclusion of any such forward looking information herein should not be regarded as a representation by Forum, its manager or any other person that the Forum objectives will be achieved. Forward-looking statements contained herein, or other statements made for or on behalf of Forum or their affiliates, from time to time, are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

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