“Huge” investor demand for residential buildings

A version of this article first appeared in the CNBC Property Play newsletter with Diana Olek. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. subscription To receive future issues, directly to your inbox.

Fundamentals are weakening in the multifamily apartment market as a historic boom in new supply continues to make its way through the pipeline and rental demand declines. At the same time, investor demand for these properties is on the rise.

For example, Camden Property Trust, a top-10 multifamily real estate investment trust, quietly began marketing its entire California residential portfolio — 11 properties worth roughly $1.5 billion — a few weeks ago and has already received significant interest.

“We have a lot of demand for it right now,” Camden CEO Rick Campo told CNBC. “Not two or three, but hundreds.”

The company wants to focus entirely on the Sun Belt, where 90% of its properties are now located, Campo said.

“We think the Sun Belt markets are going to be — once they recover, which they should, we think in ’26 or ’27 — they’re going to be better dynamic growth markets than California and the long-term cash flow growth, or net operating income growth, is going to be better concentrated in the Sun Belt than in Southern California, so that’s the fundamental reason why we’re selling.”

As for timing, he said weak fundamentals are already fueling demand.

“There was no rent growth, yet there was wage growth, so the affordability of apartments across America improved,” Campo said. “At the same time, if you look at the last 20 years, apartment rents have only been flat for more than a year or two during complex recessions or financial crises, so the market basically believes there will be a turnaround in the market.”

Rents started 2026 on a decline, with the national average in January falling 1.4% year over year, the largest annual decline since September 2023 and the lowest January rent since 2022, according to Apartment List. Rents are now 6% below their last peak in 2022.

Rents are falling because vacancies are rising. The national vacancy rate was 7.3% in January, a record high on the Apartment List Index, which dates back to 2017. Units also take 41 days to rent on average, four days longer than in January 2025, another high for the index.

“We are past the peak of the multifamily construction boom, but a healthy supply of new units is still hitting the market and colliding with sluggish demand, causing vacancies to continue to rise,” said Chris Salviati, chief economist at Apartment List.

More than 600,000 new multifamily units will come to market in 2024, the most new supply in a single year since 1986. That drops to 500,000 in 2025, and 2026 is expected to bring fewer, but still above average.

“Whether market conditions change or not will now depend on rental demand, the outlook for which has become more fragile due to weakness in the labor market and general economic uncertainty,” Salviati said.

With weak fundamentals, investor interest in the sector from private capital and REITs is strengthening. Multifamily led all real estate sectors in deal making in 2025, according to Moody’s.

Mark Franceschi, managing director of research and securities at Zelman & Associates, called it a “defining struggle.”

The volume of 12-month late transactions has increased year-on-year for 14 consecutive months, despite no change in capitalization rates, according to Franceschi.

“We still think it’s stable and steady, and the long-term outlook is good, but the fundamentals and investors are pointing to the same thing: weakness,” Franceschi said.

Berkadia’s 2026 Multifamily Investor Sentiment Survey, which surveyed 249 investors to assess expected transaction activity and opportunities within the sector in 2026, found that 87% of investors plan to expand their multifamily portfolios moderately or strongly in 2026, “demonstrating cautious optimism despite ongoing challenges.”

Additionally, a majority of investors (59%) expect moderate rent growth in the multifamily sector this year. Regionally, the Southeast, Midwest and Texas are expected to be the top regions for multifamily investment, driven by immigration trends, affordability and business-friendly policies, according to the Berkadia survey.

So, how do you resolve the gap between investors’ apparently strong appetite for apartment ownership and weak demand fundamentals?

“They are looking through weakness today to what they see as a better environment tomorrow,” said Samuel Sahn, managing partner and portfolio manager at Hazelview Investments, an Ontario, Canada-based firm with $11 billion in assets under management.

“For those private entities that have money to invest and are looking out five to 10 years, because that’s the time frame they have in their own funds, they like what the world is going to look like in 2027 and beyond,” he added.

The expected improvement in household formation and sharp slowdown in multifamily construction will ultimately give landlords more pricing power for both new leases and renewals, Sahn said.

However, Franceschi said that location (which is of course an investment variable in all real estate) will be much more important than usual in the next cycle.

“I will treat [local] Markets are like stocks. It is a market picker’s market in the same way as the stock market. “People are very focused on regions and markets.”

Analysts scrutinizing Camden’s exit from California are also taking into account state regulations.

“The positive is reduced exposure from a highly regulated country versus CPT’s broader investment focus in the Sunbelt,” said Alexander Goldfarb, managing director and senior research analyst at Piper Sandler.

This is exactly what Campo argues, although some say it has overheated in the past decade and is now overheated.

“The organizational structure in the Sun Belt is what drives the growth of the Sun Belt. It’s pro-business. It’s a young population, a highly qualified workforce,” Campo said.

At the same time, Franceschi presented another angle to the play: the alternatives within the sector, such as senior housing and student housing. Both fall under the multifamily umbrella and are also seeing strong future demographic trends, especially senior living.

“Everyone has to live somewhere. The real focus is on strong operations and stability rather than a growth industry,” he said.