← The Rent Roll with Jay Parsons
The Rent Roll with Jay Parsons
EP#79 Sam Tenenbaum | Q2'26 Multifamily Update: A Ho-Hum Start To The Leasing Season
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Sam Tenenbaum
Foreign.
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Jay
All right, it's the rent Roll your podcast on all things rental housing, apartments, SFR and btr. And it's that time of quarter. We're doing our quarterly apartment market update and outlook. Fresh data just came out this week from the big data providers. So for us data nerds, it's our little mini Christmas morning. Not, not, not really. It's definitely not like Christmas morning, but it's still a good time nonetheless. Always a crazy time. Putting together new presentation decks, trying to capture not just latest data, but the newest, the freshest storylines impacting the apartment sector and the outlook for the road ahead. So what's the big story here in April? You know, we're smack in the middle of the spring leasing season and I would describe the big story or the big theme is kind of ho hum, it's not especially good, not especially bad, kind of solid, you know, maybe even, I would say pretty good for most any other year other than 2026. But, you know, 2026 in the spring of 2026 is no ordinary year. Of course, you know, this was the year with supply levels finally dropping off, that investors and operators were really looking and still looking for some sunshine and rainbows. And here in the leasing season, and we didn't quite get that, at least not yet. It's more like it's still, it's, it's, it stopped raining, but it's still cloudy and we're waiting for those clouds to blow away and if the sun to come back out. And that process just seems to be taking a little bit longer than most of us expected or some of you hoped for and wanted or needed. But you know, big picture, we're still trending in the right direction, but it's a slog. You know, there's no denying that. There's no, there's no probably, I think we should say what it is, it's a slog. But I think we're still in the big picture, trending in the right direction, just at a slower pace. So we're going to cover the latest data today, focusing on apartment supply, demand, rent, fundamentals. Then we'll dive deeper today in the program with my friend Sam Tenenbaum, head of multifamily research at Cushman and Wakefield, which of course not only a major brokerage shop, but also the nation's first fifth largest apartment manager. So he's got some unique insights from both sides of the business in his role. So stay with us for that. All right, big thank you to our sponsors. Before we jump in, thank you to jpi, the leading apartment developer. The stated purpose to transform building, enhance communities and improve lives. Check them out@jpi.com JPI is in the cutting edge of some pretty exciting innovations in apartment development and construction. So check them out. Also a big shout out to Madera Residential, leading apartment owner and operator based in Texas. Check them out@maderaresidential.com thank you. Also to Funnel, who always sponsors our interview segment@funnel leasing.com and that'll take us to Here's a chart and you know, sometimes we do this section. Got a lot of charts for you. Sometimes no charts, just a bunch of me pontificating about things and in ideas and trends. But today we do have some charts because it's our quarterly apartment market update and outlook. And this segment is presented by our newest sponsor, ButterflyMX. Installed in over 20,000 buildings with over 100,000 five star reviews, they help you boost revenue, reduce costs and increase resident satisfaction by making property access simple. See how@butterflymx.com all right, so let's jump in. Let's get into all the data. Let's start with supply. Okay, when does that supply finally drop off? Well, it just did. Q1 2026 came in as one of our lowest supplied quarters since 2018 and below the 80,000 mark for 8,000 unit mark. For the first time in four years we had about 75,000 units completing in the quarter. That's down 53% from the peak we set back in Q3 2024. So supply is down. It's not totally evaporated. It's not like coming out of the GFC when supply just was completely gone. It's still there, but a much lower, more sustainable, absorbable, digestible levels and down materially from where it was at the peak. And we're likely to continue somewhere around these levels, give or take, through 2026 and probably in 2027. So that big supply wave is finally truly in the rear view mirror. I made this point earlier talking about 2025, I think in 2025 and this time last year, a lot of people understated how much supply was still left to complete. And in 25 we are past the peak, which is in 24. So look like a big drop off. But we still had in 2025 the third highest supplied year since the mid-1980s behind only 24 and 23. And so 26 is the year where supply really drops down. And that drop is basically universal. It's dropping in the Sunbelt markets, the mountains, it's happening and even some of the lower supplied markets like those in the Midwest, there's those macro headwinds for development are impacting developers everywhere. There's really only a handful, exceptions of places that taken a little bit longer to work through the tail end of the supply wave. Most notably Phoenix, especially the west side of Phoenix, the West Valley, Charlotte to a lesser degree. It's certainly trending in the right direction, but a little bit more still to work through before it gets back to kind of below pre Covid levels. And then even parts of Southern California, there's certain sub markets that still have a good bit to work through. And so those are spots that it's still going to drop off. It's just maybe taking till a little bit later this year and into 2027, but they'll get there too. All right, what about demand? You know, I've been thinking about these numbers a lot from different, you know, costar and Real Page data and, and, and then looking at the, looking at those numbers and putting them in context and here's how I'd put it. I think that if you looked at Q1 in a vacuum, you'd say Q1 was a pretty good absorption number, you know, around 90,000 or so according to RealPage. CoStar had a little bit less. But the broad story was pretty similar in that these were, you know, good solid numbers that in a vacuum would be a pretty solid Q1 in most years. But obviously we're not operating a vacuum in solid numbers. Look unspectacular when you have a big hole to dig out of that hole being the big supply overhang from the 2023-2025 supply wave that's resulted in this elevated vacancy that we're dealing with now. So apartment operators hoped for and kind of needed a stronger start of 2026, enough to put a bigger dent in vacancy in regain and also regain some, some pricing power. And that didn't really materialize, by the way. Let me back up a little bit. I don't want to say that everyone, I mean, hope for, like I'm saying, hoped for. I will say too though, I think in these last few months, even before the spring, I think a lot of groups initially expect to see much. Maybe this is probably more in line with the expected. And so I'm not, I'm not trying to say it's below expectations, but certainly below the upside scenario that was hoped for is probably the best way to say it. So that upside really didn't materialize. Still a solid, not bad, period. We did get a little bit of occupancy improvement and that's good, it's in the right direction, but just not enough to really lift the trajectory for the spring leasing season. Now I suppose the glass half full view of this though is that we really don't necessarily have an absorption issue or a demand issue. You know, I still see people thinking that this is the problem. It's not. Absorption was still pretty solid even in the face of some pretty significant headwinds. You know, we had very weak job growth. We have all the worries about AI and its impact on employment, fallout from the Iran conflict, low consumer confidence, et cetera, you know, and those are real headwinds. But it's good to see the competing tailwinds for demand, particularly those around affordability, favorable demographic trends and obviously net absorption also factors in. You know, those who aren't moving out are still there. So all these people coming in, you know, there's still net additions to the, to the apartment renter base because there's fewer moving out, buying a home because of the challenges, buying homes right now. And so all of those factors are still at play that's contributing to these positive numbers. Now where's that demand going real quickly? It's, it's the usual suspects. Dallas, Phoenix, Atlanta, Charlotte, Austin, Orlando, all in the top 10, led by DFW. But outside the Sunbelt, we also saw some really good numbers in places like New York, northern New Jersey, Columbus, Ohio and Philadelphia. All right, so that takes us to rents and it's kind of the same thing, you know, not bad, but not great. Kind of ho hum month or month in March. From February to March, effective rents increased 0.46%. Corporate real page data, it's not bad, but it's a good bit below the long term average for March, which is 0.62%. And it's well below we saw this time last year in March of 2025 and, and back then, if you remember this time a year ago, those numbers were so good at the time that it looked like the apartment sector was set for a strong rebound in the spring and into the summer until the market softened materially that in that summer and into the fall. And so I guess, you know, another kind of glass half full view here is that maybe the more restrained start to the year here in 2026 sets up better numbers in Q2 and Q3. Now we'll see what happens. But again, the tick, if you're looking for a positive spin, that's maybe one way to see it. Now I Should also point out that concessions remain abundant. No sign of a pullback yet. I've mentioned this previously. I think one, a very obvious early indicator. I'm the only person saying this, I mean very obvious early indicator to improved rent growth is going to be concession burn off. You know, we have one month free, that turns into two weeks free. That amounts to effective rent growth. Right. Concession values held steady though between February to March. They didn't increase, but they also didn't recede at all. Still the highest levels that we've seen since the early 2010s. And I still think we'll see some pullback on concessions this year. I think overall concessions are probably going to remain stickier than a lot of people want to see, but I do think we'll see some pullback, but it's not happening yet, especially as operators continue to prioritize heads and beds and building back occupancy. And I also think just the renters right now are just so conditioned for a deal. You know, they, I tell people all the time it's kind of like buying a car. You don't you expect to pay less than MSRP and renters today, particularly in these higher supplied, high concession markets, their buddies are getting a deal. They expect to be getting some deal. And so in some cases I think we'll see groups to try, hey, we're going to increase the asking rent. We're going to and actually keep the concession in place because that way there's still the perception of a deal. Now at the end of the day, just moving numbers from one place to the other. But again that I think the concession expectation could linger. All right, year over year, rent growth remains pretty flat. It's slightly negative, real page data, slightly positive in costar data, but basically the same story. And it's been that way for almost actually more than three plus years now, correlating with the supply wave. Of course, we still see a good bit of variation by market. The San Francisco Bay area remains on top the leaderboard. Rents are up 9% year over year in San Francisco, 5% in San Jose. Outside of the Bay Area, one market that's really snuck up the leaderboard is on the other coast. On the east coast, Virginia beach, the steady eddy of the south now topping 4% and very little supply there. Also solid numbers in New York, Chicago, Milwaukee, Cleveland and some other markets in the Midwest. On the flip side, the usual suspects pull up the rear. Denver, Austin, San Antonio, Phoenix, they're all kind of gaining, regaining some momentum. They're less negative than they were previously showing some signs of life. And they're also joined by Tampa though, which is kind of going the opposite direction. It's lost a ton of momentum. Rents there were down 5.6% year over year. And that's a massive change from just one year ago when Tampa ranked among the few Sunbelt markets actually seeing positive rent growth. But it's pulled back significantly and that traces to some weakening demand, some occupancy losses, particularly the second half of last year. Another market to keep an eye on, and one that's, that's frankly really surprised me is Houston. And this one really puzzles me. And I, and I think I said this previously, but I expected to see better numbers there. There's really not a ton of supply there. I think one of the great stats about Houston is that its construction rate as a percentage of stock was actually below the US Average in the cycle, which is pretty remarkable considering all the growth that's happened in that market. And yet it's, it's, it's not seen good apartment absorption. It actually has dropped off pretty significantly over these last 12 months, even though at the same time we've seen great popular migration into the Houston market. In fact, the sense day that just came out a couple of weeks ago showed the Houston MSA is the number one market for population growth in 2025. And so a lot of good in migration, there's corporate relocations and whatnot. So I still think Houston's going to turn the corner. It's just, it's hard to ignore the relatively minimal supply there combined with all the domestic and migration, corporate locations, et cetera. But it could be there's just some impacts from immigration issues there as well as just population growth just not translating to household formation yet. So I think we'll get there, but it's one to keep an eye on. But you know, some of these slowdowns, not just Tampa and Houston, Sunbelt, it's also outside the Sunbelt. We've seen some rent momentum backtrack in Southern California. We've seen it in northern New Jersey. We've seen it in places like Kansas City, which has been a hot market for a while now. It's not everywhere. I think in the national numbers it's like, you know, it's a little bit of a mixed bag. You know, some markets are going losing a little momentum, others are gaining a little momentum, particularly seeing some of these higher supplied markets where rents are still falling, but to a lesser degree than previously. Places like Salt Lake, Austin, Nashville, etc. All right, so here's the bottom line. We're in the heart of the spring leasing season, that leasing season now, excuse me. And the balance of power is still very much with the renters. They've got more options thanks to all this supply. And that means it's still a very competitive leasing environment in most of the country. And supply is trending down, but there's a lot that's completed from 23 to 25 still going through lease up, still trying to get vacancy rates normalized. And it's clear at this point, we've been saying this for a while, everybody knows this at this point that most operators, they want and need to see vacancy rates normalize before they could regain some pricing power. So we'll see how this plays out over the next few months. But it sure feels like it's going to be a slow and steady process, some two steps forward and one step back until we finally get there in vacancy, and then I think we'll see some momentum. And by the way, if you can
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Interviewer
tell my voice a little different, I
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Jay
got a little bit of a cold today. So thankfully I'm not contagious over the podcast here, but apologize if I sound a little funny. All right, next up, rental housing trivia. All right, today's trivia is presented by Authentic. If you've got a property that's underperforming and you can't quite figure out why, check out their multifamily leasing and marketing audit. They'll dig into your pipeline, your leasing funnel and comps and tell you exactly where things are breaking down, plus strategies and how to fix it. Listeners of the pod get 50% off, so head to authentic ff.com and click on the banner to learn more and claim the offer. All right, so today's question is, outside of San Francisco, which market has seen the most improvement in year over year rent growth over the past 12 months? So we're comparing what it was in March of last year to versus March of this year. Where do we see the most growth in that second derivative? The change in the change, was it Atlanta, Chicago, Orange county, or West Palm Beach? So give that some thought and we'll answer that here in a bit. Next up, it's time for a good question. All right, good question. We've not done this segment in a, a while, but I'm excited to bring it back. This is basically a question that we're getting whether for email or social media from an event and that I've done and, and, and, and, and share it with this with the broader podcast audience here. This segment is going to be sponsored by Inside the Deal, a CRE podcast by Bercadia. It's a commercial real estate podcast, takes you beyond the headline and into the heart of the transaction. Hosted by Barcadia's EVP and head of production, Ernie Kateg, each episode pulls back the curtain on a real deal, unpacking the situation, the challenges, the creative solutions and the outcomes achieved. You hear directly from Berkadia producers as they share what really happened behind the scenes, the roadblocks they hit, how they navigate the market, and the strategies that ultimately got the deal across the finish line. So if you work in CRE or just want to understand how complex deals actually get done, this is where you'll find stories, lessons, perspectives you won't see in a press release. So follow Inside the Deal CRE podcast by Brickadia wherever you get your podcasts. All right, so today's good question is what impact is immigration policy having on apartment demand? And I've begun this one a lot lately and so I thought we'd take that here on the podcast. I alluded to it briefly in my conversation about Houston earlier and you know, I think the punchline is this. It is a real issue in spots, but it's not a systemic issue, meaning it's not a factor for most apartment properties across the US or even most apartment properties in in border states for that matter. But it can certainly be an outsized issue for a small share of apartment properties, particularly class C in sub institutional deals in more working class neighborhoods all across the country. And we've certainly all heard stories of properties that went from, you know, 95% occupancy to 75% occupancy overnight after a raid or an enforcement event nearby. And that does happen, but it's not widespread. And part of the reason why this is, is that it's just, it's some of it's just the composition. It's the type of properties where we see recent immigrants live. John Byrne's team did some great analysis with some census data showing that recent immigrants tend to live in older, smaller, multifamily buildings as well as in sub institutional single family rentals, not the higher price class AB professionally managed apartment buildings, generally speaking. So there's an impact, absolutely. We can't deny that, but it's really concentrate the lower end of the market. And immigration I think could remain a headwind in that segment. All right, next up in the news. All right, this segment is going to be sponsored by Telecloud if increasing NOI is a priority, your telecom contracts may be one of the easiest opportunities in your portfolio. Telecom helps multifamily asset managers consolidate Internet voice and dial tone across properties. These the average cost reduction is 40%. It's often more than that, so to make it easy, they'll start with a free telecom audit to show you exactly where savings exist before you make a move. Learn more@telecloud multisite.com all right, our first headline is going to come from CBRE and it's their always interesting report on corporate relocations. The headline is the Shifting Landscape of Headquarters Relocations 2026 update and I'll read part of this. It says Texas metros, especially Dallas, Fort Worth and Austin remain the strongest magnets, with DFW receiving over 100 headquarters relocation since 2018, the most of any US metro area. And in 2025, DFW gained an additional 11 headquarters from other high cross metros like Los Angeles, San Francisco, Bay Area, New York and Chicago. Also Chicago, I'm sorry, Chicago, Charlotte, excuse me, Charlotte. Miami, Nashville, Phoenix continue rising as major contenders due to pro business environments, tax benefits growing in diverse talent pools and supportive infrastructures. And by the way, all of those added six to eight headquarters, as did Tampa, according to cbre. They all go on to write that California's largest metros, now the Bay Area and Los Angeles, continue to experience net headquarter losses with departures driven by high taxes, labor regulations and cost of living pressures, according to CBRE's research. So LA lost 10 headquarters in 2025, San Francisco lost seven, San Jose five in Portland lost three. And then there's New York City, which kind of a mixed bag. They lost nine but added seven. So a net loss of two. But the fact they still added seven shows the Big Apple is still a big magnet for some groups. All right, next headline comes the Providence Business Journal. It says, Providence City Council Approves First Passage of Rent Stabilization Ordinance. All right, so we got yet another city jumping on the anti science train, rushing to ignore all the data in the academic research, insisting they know better. This time is different. Their version is different. This time it'll actually work as intended for the first time in the history of mankind. Now, the ordinance would cap rent increases at 4% for some households. It includes vacancy control, which means rents are capped not just at renewal, but also for new renters moving in, which of course is the kiss of death for new construction, even with a partial exemption. And it's really a shame because you know, again, what we've seen is this. These policies have backfired again and again on the renters. People who are actually trying to help are the ones who end up getting impacted by it. Now if you're a long term rent in the same spot, you certainly benefit, but it comes the expense of the far greater number of all future renters who come into this market and not being able to find places to go. It's already a tight market. They don't build a whole lot there. And this will only make the supply issues worse. Now the good news is the mayor has said he will veto the measure because he knows exact knows it'll only exacerbate affordability problems like it's done elsewhere. But the and the council will need to get one more vote in order to overcome that veto. So we'll see what happens. But for what it's worth, it's worth noting that Providence not not exactly an institutionally favored market. So this would primarily impact mom and pops and local investors there. All right, next headline Multifamily Dive Sun Life Financial Buys Bell Partners for $350 million. The financial services organization will combine the Greensboro, North Carolina based multifamily investment and operating firm will with the global real estate investment manager BGO. All right, so we got a big deal in apartment world. Bell manages about 70,000 apartment units and owns a good sized chunk as well. It looks like this deal is just for the operating company, so presumably that excludes real estate ownership stakes. But I'm just guessing that from reading between the lines and I could be wrong.
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Interviewer
Also, the article tells us that Bell
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Jay
Partners will attain it's a brand and continue to operate as a distinction business under BGO. In addition to overseeing the broader company's U.S. multifamily assets, the firm's existing management team will remain in place. All right, one more big news item and this is a big one that I that came from last month and I just missed it. Big miss on my part and it's sad news. Dean Widener passed away in March. An absolute legend in the multifamily business. The founder and chairman of Widener Apartment Homes, based in the Seattle area, Dean built the company that bears his name into the 12th largest apartment owner in the country with 75,000 units across 323 urban communities. And I'm going to read this in the Widener news release. It said Dean founded Widener in 1977 with a simple purpose, to provide residents with clean, functional and well maintained homes. What began as a practical investment quickly became something more meaningful. The responsibility of providing shelter, one of life's most essential needs, ignited by a ignited a lifelong passion to improve the multi million landscape, becoming one of the greatest honors of his life. So well said. And Dean leaves a lasting impact on the apartment business as a businessman and as a philanthropist. All right, and next up, let's go back to today's rental housing trivia question. The question was, outside of San Francisco, which market has seen the most improvement in year over year rent growth over the last 12 months? Was it Atlanta, Chicago, Orange county, or West Palm Beach? And the answer is D. West Palm beach quietly hung back up the charts year over year. Rents were down 1.4% one year ago. Today they're up 1.7%. And that's happening largely because occupancy has climbed back up faster than most other than it has in most other markets. Okay, next up, it's time for today's interview. It's going to be sponsored by my friends at funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Cortland. To learn how Funnel can help your property centralize operations and automate everyday tasks, visit funnelle leasing.com okay, our guest today is Sam Tenenbaum. He's a senior economist, the head of multifamily research at Cushman and Wakefield. As I mentioned this earlier, many of you know Cushman as the first brokerage arm, but remember, they're also a big property manager. They bought Pinnacle a number of years ago and they manage about 170,000 units and rank fifth in NMHC's top 50 managers list. So Sam has a good view on both sides of the business. So we'll talk fundamentals, the recovery, as well as capital markets with Sam. And let's jump in. All right.
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Interviewer
Welcome to the interview portion of today's podcast. And I am honored to welcome in Sam Tannenbaum, the senior economist and head of multifamily research at Cushman and Wakefield. So, Sam, thanks so much for being with us today.
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Sam Tenenbaum
Thanks for having me, Jay. Pleasure to be here.
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Interviewer
So tell us, first of all, you know, I always like to ask people this before we get into all the meat and potatoes. How'd you get into multifamily research?
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Sam Tenenbaum
Isn't the story the same for everybody? They lucked into it or fell into it or what have you? No, I started my career. I graduated with a degree in international development and convinced someone that that sounded close enough to real estate that they should hire me. I'm Kidding. I'm kidding. By the way, I started my career working for GIV Investment Advisors, obviously a large vertically integrated multifamily owner operator doing international research. So they were looking to expand into Latin America and quickly found my way to more U.S. focused real estate at a organization called PPR, which was owned by CoStar, but sort of a preeminent real estate consulting shop that's focused on institutional clients. Any, any institutional client you can think of were probably a client of PPR in one way, shape or form, covered something like 25 markets over my career at CoStar. And yeah, just I, I love talking about real estate. I love multifamily. In particular, the discussion around where people live and why fascinates me endlessly is the best way to do it.
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Interviewer
Oh, I, I agree. And by the way, just for those listening, PPR has a absolutely legendary alumni base, people working in key research roles across the company country. So that's, that's a good, good shout out there. So Sam, you know, I know in your job you talk about all day, every day, hey, what's going on? Multif family to all your clients. And so when someone asks you if you know your elevator pitch of, you know, hey Sam, like what's your take? High level on the US multifamily market right now, what do you tell them?
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Sam Tenenbaum
I, I ask seven follow up questions and hope I get a little more detail. Yeah, no, I, I, I think right now the multifamily market is at an inflection point. It's no secret that we've been dealing with a 50 year boom in new supply and deliveries and we're at the tail end, maybe even past the tail end of that and kind of have it in the rearview mirror. And I think now it's all about demand. And last year, or at least according to our data, was the third best year in 25 years for apartment demand. Incredible. Year Q1 looks a little more normal by Q1 historical standards. Obviously a lot of seasonality in the multifamily universes you're fond of talking about with, with the listeners of this podcast. But I think if we're looking at a more normalized demand level, that's a good sign given that the supply numbers are about to and or are falling off a cliff at the moment.
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Interviewer
Yeah, absolutely. That's the big story right now. So obviously we're just getting the Q1 and March data and you have the good fortune of seeing data from a lot of different places. So I know for us research nerds, it's Like Christmas morning every quarter and we get the latest data. So as you're pouring through those spreadsheets and data files, were any surprises in that latest round of data or anything jump out to you?
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Sam Tenenbaum
Not nothing really crazy. I mean, obviously, like you, Jay, I look at the data on a monthly basis. If we're digging into the COSTAR data, I can look at some of that, those data points on a daily basis. So I kind of tried to cheat a little and start taking a look at that data a week or two early and try and figure out where the tea leaves are, are, are pointing me. But I think for the overall sense, the thing that surprised me or that I think really should surprise the industry more broadly, maybe is a better way to put that, Jay, is, you know, you look at the economic data and the demographic data, and it's been all of the things that you would be looking for, for poor demand performance are there. Right. We've had the weakest population growth in the country last year of any year in the past, I think since 1960, before the 60s, as a function of, you know, weaker immigration policy and the like. And then you look at the labor market, and we've essentially added almost no jobs over the last year. I think we're at 0.2% year over year nationally in terms of job growth. And everyone loves to talk about job growth in the markets that are adding lots of jobs. And that's going to mean a ton of apartment demand. And I think what we're seeing, at least right now, is a, a pretty significant disconnect between what, what you would normally associate with economic fundamentals for multifamily and housing demand and the reality on the ground, which is good, good apartment demand. I mean, there's, there's no way you can deny that the apartment market is seeing pretty healthy absorption figures, all things considered.
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Interviewer
Yeah, no, absolutely. And I will always add the caveat I'm sure you'd agree with, which is that there's a lot of absorption. But not every property manager feels that because that absorption is being spread out
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Jay
a lot of properties.
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Interviewer
And so I always get, I always get my people, my friends in property management always kind of, you know, give me a hard time about that. So I like to, I just want to call it out really quickly. So there's a lot of supply, a lot of absorption, even more supply. So you don't always, you know, it's not, you're not feeling that wave of absorption.
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Jay
But to your point, Sam, it's definitely there. And let's Build this a little more.
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Interviewer
Obviously you alluded to the supply is the known variable, it's going down. I mean, supply is the easiest thing to forecast. Everybody knows what's going on there. But there's big questions around demand and rent. So let's start with demand. And you've alluded to some of these things. There's slow to no job growth. Everybody likes to show. Always talking about this weak hiring rate of young adults coming out of college.
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Jay
We have AI.
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Interviewer
And I want to get your take on that kind of separately as well because I know that Cushman's done some real work on that. You mentioned immigration. We have the war in Iran, but also some real tailwinds around, you know, the elongating renter stage of life, high mortgage rates, affordability, which actually improving for
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Jay
apartment renters, especially in the market rate side.
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Interviewer
So what's your take on demand for this year? And do you think we have enough, you know, juice in the tank right now to put a meaningful dent in vacancy with supply coming down? Is there enough demand out there to actually absorb some of that excess supply for these last couple of years?
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Sam Tenenbaum
I think we need to add appropriate caveats before, like in any economist, like we need to add seven caveats before we answer any clear question. So assuming, assuming no recession, assuming we sort of have an economy that looks broadly similar to what we have now, I think there is still gas in the proverbial tank for maybe not the third best year for apartment demand. I don't think we're going to take over what we've done over the last two years. In 2024 it was the second best year. In 2025 it was the third best year. I don't think we're going to get the second or third or maybe even fourth best year this year. Our general projections are somewhere in the neighborhood of something like 30 to 40% less demand this year than what we did last year. But supply, that's 50 plus percent below where we were last year. So you put those two things together and it doesn't take an economist to tell you that we see some real room for absorption, outpace demand or absorption to outpace new supply. And that drives down or at least somewhat drives down vacancy, obviously market, submarket dependent and all of those caveats as well.
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Interviewer
Yeah, I completely agree. Let's talk about some of the components of that. I just became aware of something that Cushman is doing, trying to measure the impact of AI and on jobs. So tell us the work that you all have done there and what key takeaways you're seeing for apartment owners and operators.
- [33:44]
Sam Tenenbaum
Sure. So yeah, the nice. Thanks for setting me up to plug it, Jay, but we just released our AI impact barometer. Our team has spent a lot of time thinking about the implications of AI. The barometer itself is 40 plus different variables. We've looked at hundreds of variables to narrow it down to just those 40. It talks about the economy, it talks about capital markets, it talks about every asset class. You can find that on our insights page on the Cushwin and Wakefield website. And I really suggest digging in because it's a huge meaty topic. The challenge that we found is we know AI is going to have a meaningful impact on the way real estate is functioning. Our challenge is we need to be able to measure the data point. So when we think about how AI will impact the multifamily universe, the easiest way in the most direct way you can point to is tech markets doing well. And I think we're very clearly seeing that with San Francisco and San Jose, the broader Bay Area leading country in rent growth over the last year, something like 8 +% at least in our data set for San Francisco. And I think that's kind of been well established across the industry. Every conversation we were having at nmhc, the first market out of everybody's mouth was San Francisco, then maybe New York was the follow up for that. And you can argue there's. Even though New York is a hugely diverse economy, you're not going to see as big of a boom in bust as you might in a Bay Area from a AI boom. I think it's very clearly having a meaningful impact there, not just in the AI specific companies, but in the financing companies that are behind the AI companies and the residual returns that these companies are getting as they invest in into AI. But if we think about the other component of where we see an impact, it's the growing K shape within the US economy. And when I say that, Jay, I know you probably have a sense of what that means. But just to be clear about what that means, it's the higher income households are driving a disproportionate share of activity across the US economy right now. Moody's estimate somewhere between 45 and 50% of all consumption in in the country is done by the top 10% of incomes right now. That's at least an all time high going back to when we've pulled the data that's showing up in the apartment renting cohort as well. So the top quality, the highest, the Luxury of all luxury buildings are actually outperforming. If we look at what we've put together is revolution revenue per available unit. So it's just occupancy times rent and there we're seeing outperformance in the highest end. Class A plus, class A, Class B not doing as well. If, if we look at B and C occupancies alone, they're, they're falling. Class A occupancy is slightly increasing. It's not, you know, certainly not as much as owners I'm sure would like it to be. But, but definitely the trend is divergent from a quality perspective.
- [37:01]
Interviewer
Yeah, no, absolutely. I think you and I very much agree on this. There's much more of a flight to quality than a flight to affordability, both among renters as well as investor demand. And I think this data makes that clear. And similarly, that's another question about AI though is on this topic and I like your point. This is contributing to the flight to quality. Again, that's a great resource and I'm
- [37:22]
Jay
glad you all put that out.
- [37:23]
Interviewer
So Sam, let's shift to the other big hot topic for multif family. We talk about demand, all the variables that go into that. You put the appropriate caveats there.
- [37:31]
Jay
What about rent?
- [37:32]
Interviewer
And this is probably the biggest question I get asked and so I'd love to get your, your cheat sheet answer here. When do concessions start to burn off and when does rent growth really return?
- [37:42]
Jay
I say return, I mean like kind of normalize or better.
- [37:45]
Interviewer
And so and what's in related to that? What's your forecast for rents nationally here in 26 and then 27?
- [37:51]
Sam Tenenbaum
I think it's a great question and obviously we talk about it all the time, you and I do, and I talk about it with my colleagues and my fellow multifamily researchers across the industry. I think, look, it's no secret the last half of 2025 was weaker than most people expected. Given how the year started and given really those headline demand numbers, I think we're unlikely to see, you know, 3, 4, 5% rent growth this year and next year. I obviously with some markets exclusion excluded on that list, we talked about San Francisco being at 8 plus percent year over year. That's an anomaly. I think we're very close to rent growth, picking up momentum again, I think we're closer than people realize to that level because everyone sort of expected supply to be to peak in 2024 and then fall off significantly in 2025. But as you alluded to earlier, Jay, it's the easiest variable to forecast. And for those that were looking at new construction starts and deliveries and when they were coming to the market, it was going to be 2025. That was sort of the tail end of that, of an elevated pipeline. We're past that. I mean, there's something like 450,000 units under construction today. That's the weakest level since 2016. Pour one out for all of our developer friends, obviously, because it's real tough to get projects started and the market to be constructive for that. And we can talk about replacement costs and all the reasons for why that might be the case. But the reality is, until we see that drop off happen in 2026 is when that drop off is going to happen, it's going to be hard to underwrite meaningful rent growth. But I think I'm a little bit more bullish than real. Page and Costar are for rent growth. I think both of them have fairly weak rent growth through the, through this year in the 1 ish percent, 1 1/2% range. Kind of in that range, I think there's a realistic case where we get to high 1%, low 2% this year, and then building into next year, you know, kind of two plus percent. And that's nationally. Right. So there are markets in there that are going to underperform and outperform and that's the beauty of real estate. But I think it's fairly clear that if we're at the tail end of the supply pipeline and demand is even normal levels of demand, we're, we're, we're looking for a pretty good year this year.
- [40:27]
Interviewer
Yeah. So you think even. I agree with you on 26, but in 27 you think we'd still be two plus, not, not, not three plus. I know people listening are probably thinking, Sam, I was thinking I open for a higher number than that.
- [40:39]
Sam Tenenbaum
So should I just say six? I mean, I work for a brokerage company. No, I'm, I'm only kidding. I, I think, I think there's a case for high 2% next year, low 3%. It will depend on the degree of vacancy compression we get this year. I think this year, if we realize the peak in vacancy, we start to see that decline, you'll feel the momentum happen. Especially given how weak second half of last year was. You sort of get some base effects that will help boost rent growth. I think next year, you know, if we're looking at vacancy rates that are 150 basis points lower than where we are today, great. Absolutely. Three plus percent. If we're looking at, you know, vacancy rates that are 50 to 75 basis points below where we are today. There'll be momentum. But you look back to coming out of the financial crisis, we didn't get to 3, 4, 5% rent growth until kind of 1415, when we had meaningful growth start to pick up and push the overall occupancy number high enough to justify it.
- [41:47]
Interviewer
Yeah, absolutely. Good point. All right, Sam, I want to get into capital markets as well because I know it's a big part of your job. But before we do, let's finish it up on fundamentals by doing a lightning round across the country. And let's start with the region that's been most impacted by that supply, and that's of course the Sun Belt and the mountain states. So first question there is what markets do you think in these high supplied areas? Which ones rebound first? Do you think?
- [42:12]
Sam Tenenbaum
I am probably, you know, Jay, that I'm an, I'm an Austin guy through and through. I'm. I'm between six and nine months away from saying some very irresponsible things about Austin in particular. Everybody likes to beat up on Austin and I get it, they built something like 100,000 units in a four year time span. It's too many units. It's objectively too many units. But in our data, they were the fourth most demand on a nominal basis of any market in the country. It's a small, smallish market. It's obviously grown quite a bit in the last few years, so it's a bit bigger. But the demand numbers are pretty clear. I think, you know, Raleigh leading the country in population growth over the last year. Also a pretty good barometer. Atlanta, Nashville is probably in the middle of turning. Charlotte I'm a little concerned about because the supply pipeline is a little high for where I would like it to be. But I can see a world in which Charlotte also has some of the best demand in the country. And one of the pieces of research that we like to do. Not to give you a long answer on this, Jay, but I can't help myself. One of the fun metrics that I love to look at is a metric we call years of supply, which is essentially how many units do you have under construction and what's the demand been over the last few years? Year, and then just a simple division of those two to say if you get the same level of demand as what we had last year. And maybe that's unrealistic, but you could do this analysis with any sort of demand normalized demand number you want to use, you want to look at 15 years, five years, three years, what have you, you can do the same math. The ratios will all stay pretty similar. A lot of the Sun Belt is towards the bottom end, meaning that they're way past their supply pipeline, doesn't lead the country in construction activity anymore. On a percentage of inventory basis. The recovery is real. It's going to pick up meaningfully in the second half of this year. And I think 2027, we're going to see a lot of those Sunbelt markets kind of jump to the top of investors list because I think they're going to be ahead of the game even if I think this year is when you start wanting to position yourself for that.
- [44:08]
Interviewer
Yeah, I think it's important to remember to your point, Sam, that if you take Austin, but I think that probably the same thing could be true of Nashville and Charlotte, maybe Raleigh, is that, you know, that these aren't markets typically flatline. You know, they're typically markets that are going to be really hot when there's little supply and cold, there's a ton of supply.
- [44:25]
Jay
Right.
- [44:25]
Interviewer
And so I think that it's a good call to see some of those markets. You know, I'm probably a little more bullish on than, you know, in Charlotte, but I think all those markets are pretty well positioned now. What about the west coast? Because it's been spotty.
- [44:38]
Jay
We talk about the Bay Area a lot.
- [44:39]
Interviewer
There's no denying the strength there, especially San Francisco, San Jose. But in SoCal Pacific Northwest, it's been much more mixed. And they just, some of these markets, particularly we pick on Los Angeles a lot, but even Seattle, which is very different, of course, they just can't seem to really get that momentum going like
- [44:57]
Jay
the Bay Area has.
- [44:59]
Interviewer
And so I guess just big picture,
- [45:00]
Jay
does the Bay Area stay hot and what other parts of the west coast
- [45:04]
Interviewer
you see maybe finding some momentum here soon?
- [45:06]
Sam Tenenbaum
Yeah, I think it's a great point because obviously we can talk about San Francisco for a long time and I think it was the easiest call when San Francisco was trading at a 6 plus cap a few years ago to say, well, this is a market that's going to take off as soon as the light switch flips Southern California. I think we're actually starting to see, at least in our data, I'm starting to see a little bit more momentum than I think people are willing to give it credit for. It's still some of the most beautiful parts of the US it's the second biggest city in America is Los Angeles. You include Anaheim and Inland Empire into that. It gets, you know, really, really quite large. I think we're seeing more momentum there than people are willing to give it credit for. Not in terms of, I don't think it's going to lead the market or lead the nation and rank growth across the board. But you think about la, we've got the Olympics and the World cup coming, like there are reasons to, you know, sort of position ahead of a lot of that growth because there's going to be a lot of investment that's happening as a result of those two events over the next few years. And I think there are reasons to believe that that market will be maybe not the best performer but amongst the top performers in the country.
- [46:19]
Interviewer
Yeah, well, there's still structure under supplies. That's, that's always going to be a tailwind for those markets. Now what about the, the Midwest? It's been the, the steady eddy. It's been the, you know, see more institutional capital flow into places like Indy, Kansas City, Columbus. Does that story continue, you think?
- [46:37]
Sam Tenenbaum
I'm giving you long answers, I realize for a lightning round, so forgive me Jay, but I think not to shortchange our friends in the Midwest, but I think the Midwest will continue to see larger amounts of capital as a function of the fundamentals have just been so good. There's been very little construction activity in the Midwest for most of the last 15 years. I, with the advent of work from home and, and all that, I think there's a real reason for the Midwest to outperform at some point. I think the Sun Belt will probably overtake it from a growth perspective, but I think from a portfolio diversification perspective it makes a ton of sense to have in a portfolio.
- [47:18]
Interviewer
Yeah. By the way, I don't think even our Midwest friends would disagree with that, which is that there's going to be points in time when the, the Sunbell and the coast are doing better. They're just going to say hey, we're going to be the most consistent, you know what you're going to get. So, and I think there's like you said, there's a, there's a, there's a role for that in a diversified national portfolio.
- [47:33]
Sam Tenenbaum
And in, in particular, if, if what we're looking at over the next few years is elevated treasury rates and, and a yield starved environment across commercial real estate in multifamily. I'm not sure there's a better place to get yield than in the Midwest. Obviously pick your spots and markets and class Asset classes. And I mean, we can, you know, there's all those caveats, of course, but I think. Right, right. There's, there's a lot of reason for that.
- [47:59]
Interviewer
Absolutely. All right, then, of course, the Northeast, Mid Atlantic for first and foremost, when do you think D.C. and Boston regained some momentum because they were hot, but then lost a lot of that last year?
- [48:10]
Sam Tenenbaum
I mean, DC is a function of the Doge cuts. Right. It's not a secret that, you know, thousands of federal employees are no longer employed by the federal government and need to find work elsewhere that's likely outside of D.C. so there's going to be some pressure there. That said, I mean, you listen to the same REIT earnings calls that I do and they all talk about D.C. being one of their better performing markets, all things considered. Boston, I think, is a little bit of a different story. Boston, obviously a little bit of a challenge from international student populations, but I also think life sciences being as out of favor as it's been in, in the past, over the past few years has a lot to do with that as well. We're seeing a lot, we're seeing some real momentum in the life sciences space start to pick up. NIH funding is not where, where people want it to be in that market, but as soon as, like I said, as soon as you start to see NIH funding pick up or, you know, more aggressive, and I think there's a real reason for AI to help facilitate some of that, in particular in the life sciences space that I think we'll see Boston probably pick up relatively soon. Obviously New York, Philly, Northern Jersey, kind of the other Northeast, Mid Atlantic markets doing very well in particular. Philly, I think is probably an under discussed story. I don't just say this as a Phillies fan, but you look at where job growth has been over the last year. It's healthcare. It's healthcare. Healthcare, healthcare. It's like 75% of all jobs added over the last year has been in healthcare. And Philly is a huge healthcare hub. So if you're following the job growth, that's one of the markets you really want to be in.
- [49:56]
Interviewer
Yeah, I don't disagree with any of your takes on that region. And I think Boston remains such an attractive market in so many ways. And unless they passed in November, what is a very draconian version of rent control across the state, it's hard to see that market really slowing down much or, I'm sorry, that market not regaining some momentum at some point because those
- [50:16]
Jay
drivers are still there.
- [50:17]
Interviewer
Even if you're getting some short term noise.
- [50:19]
Sam Tenenbaum
Every market's breaking.
- [50:22]
Interviewer
Yeah, yeah, absolutely. Yeah, but yeah, they're all great. Yeah. But they've each got their own thing. So Boston's a cool city. There's some places you just think, man, that's a good spot except when it's freezing. All right, so capital markets.
- [50:35]
Jay
All right.
- [50:36]
Interviewer
We probably could have led with this because we've, I know there's been a lot of noise around this these last few years. You know, it's been, hey, the second half of the year is gonna be better than the first half of the year for capital flow. It was no different this year. We're both at NMHC talking to people, hey, second half of the year better than the first half of the year. But then of course we had this little thing happen in Iran and all the stuff with oil and we all kind of don't fully understand the, the, the, the, the, the, the, the relationship, the fallout that, how it impacts the US economy and demand, but certainly does, I'm sorry, capital markets certainly has some impact there. So I'm curious, as you're working with your friends in the brokerage side of the business, talking to your clients, what impact are you seeing from what's happening in Iran and the broader economic uncertainty, the pickup in rates on the capital
- [51:22]
Jay
markets for multif family right now?
- [51:23]
Sam Tenenbaum
Yeah, it's a great question. I think if we're talking about the ultimate impact on fundamentals where I think we're doing a little bit of clutching at straws for trying to figure out the impact of higher gas prices on apartment renters. And like to your point earlier, renters are in a very good shape financially in the grand scheme of sort of rent income ratios both in the real page data that gets reported in our data, we manage something like 150,000 apartments. We see, you know, pretty healthy rent to income ratios. The rates are affording very healthy rent to income ratios. Renters seem largely okay. Now obviously there are going to be components of that where class C marginal renters are going to be more pinched and, and the like and we can talk about some of the implications there. But I think, you know, an extra, not to sound flippant, but an extra 50 cents a gallon is, shouldn't be the difference between whether you're renting an apartment or not rent, you know, forming a renter household or not forming a renter household in the grand. Right. In terms of the capital markets impacts, it's a little clearer. Right. We've seen the run up in the 10 year treasury it's up 30, 40, 50 basis points since it hit sub 3% earlier this year. That's the clearest implication and that's a function of inflation. The market had been pricing in early in this year at the beginning of the year, two rate cuts if you looked at the Fed Fund's futures. So as it follows, not to say that the rate cuts directly impact the 10 year treasury, but it's sort of indicative of where the Fed's broader stance was, was a bit more dovish
- [53:02]
Jay
a
- [53:03]
Sam Tenenbaum
couple weeks ago or maybe last week. No, it was a couple weeks ago the market was pricing a higher likelihood of a rate hike than a rate cut this year by year end. So that noticeably shifted up the ten year treasury and the like. It's since coming up a little bit. I think I looked this morning, it's about 50, 50 between a rate rate cut and a rate hike. Most, most likely I think it's like a 75% likelihood that rates are basically exactly where they are today by year end but with a 10% chance on either end of, of higher up 25 basis points higher 25 basis points lower. That I think fully encapsulates kind of the relative impact here. If we see the labor, if inflation picks up as a function of higher oil prices, the Fed will be more reticent to cut even if the labor market starts showing meaningful signs of deceleration. And that's why we're seeing higher tenure. Where it becomes really interesting though is where you're looking at the spread, the risk spread. So the best proxy we look at for this is triple B index option adjusted spread. You can find it on, on the Federal Reserve bank of St. Louis's website. Fred, everybody's every economist favorite website. Yes, it's, it's effectively I looked this last week, it was up I think something like 4 basis points since the beginning of the war. It's, it's, it's done a bit of, it's had a bit of volatility. Of course there are some days where it's 10, some days where it's, you know, two or three. But I, I think the general sentiment we've had in talking to our capital markets team both on the equity side and the debt side is relatively limited impact. All the lenders still have huge appetites. CMBS is still roaring. We just had a long email exchange about, you know, whether there'd been a series of retrades and broadly speaking, not a lot of retrades happening as a result of this. Higher rates. Yes, that makes financing a little bit more challenging. For sure, your debt costs are a bit higher, but in the grand scheme of, you know, the disruption during the rate hike cycle, this is nothing by, by that comparison. Right. We're not talking about a meaningful reset in values and the huge dislocation. It's really a function of debt costs are a little bit higher makes deals a little bit harder to pencil, which is not dissimilar from where we were, you know, a year ago. That said, I mean that costs are in from here. We were a year ago too. So it's, things are, things are better.
- [55:39]
Interviewer
Yeah, so, so not a huge disruption, but certainly, certainly at least a major talking point now that's having some impact.
- [55:49]
Sam Tenenbaum
And I should say, and none of, none of this is meant to be flippant about the real life implications of the war obviously, but from a financial markets impact on, on CRE more broadly, it's fairly de minimis this far.
- [56:03]
Interviewer
No Sam, we stay in our lanes. Like we don't know what we can't. We're not experts in Internet. Well, you studied international affairs I guess, but I certainly don't get into global affairs and we're sticking to our bread and butter here. Now let me ask you a natural follow up question which is we've seen a lot of loan extensions extend and pretend or just extend and just some optimism that the future will be better and that's allowing, I think some distress.
- [56:32]
Jay
Either get it quietly worked out or just kind of pushed out further.
- [56:36]
Interviewer
Have not seen much distress hitting the market. It's been a big theme ultimately these
- [56:39]
Jay
last few years is really the lack of distress.
- [56:41]
Interviewer
But do you see that changing this year? Particularly if there's a, you know, let's say an extended disruption related to Iran or other economic issues.
- [56:50]
Jay
Does that become more of the story this year? But do you think.
- [56:56]
Sam Tenenbaum
I think it helps to ground this in a degree of data. That's where I always come back to and I'm sure you do too, Jay. When we looked at the data last year, something like 70% of loan originations was for refi activity. That is the highest level our msci Real Capital analytics has ever recorded, at least going back to 2000. And that says a lot. Normally it's something like. So if last year was roughly call it 70, 30 because there's some construction in there. So it's like 70, 25 and 5% construction. But let's just use round numbers here, call it 70, 30 refi and new acquisition. Normally it's something like 55 to 60% refi. So we're meaningfully above normal activity there. I think there's a lot more acceptance of, look, this is roughly where the tenure is. I think your takeaway from nmhc, I'm sure, was similar to mine where the, the sentiment was relatively sober about this year probably isn't going to be as good as everybody hoped it was two or three years ago. And as a result, there's more acceptance of the market probably isn't coming to bail everybody out who's in a tricky situation. It's not to say that some sponsors won't want to kick the can down the road because they don't want to print negative irrs. And it hurts being able to go out and raise more money for their next fund and the fund after that. But I think at some point you can't just keep kicking the can down the road. And so look, I don't think we're going to go from 70 back to 55 in 2026, but I think we may start to see that 70% in terms of refi acquisition split grind a little bit lower, see more new acquisitions, more fresh capital coming in. Because I think people are realizing that maybe the business plans that they had hoped for when they were underwriting 2021, 2022, which it doesn't feel like it, but 2021 is five years ago. We're at the tail end. A lot of those extensions that people were trying to work on. It's, it's kind of, for lack of a better term, put up or shut up time for some of these sponsors who either will have to come up with huge amounts of capital infusion to keep the deal alive and maybe print positive returns or, you know, sell the asset, move on, try and find something else to work on.
- [59:35]
Jay
Well, Sam, this has been great.
- [59:36]
Interviewer
Thank you for letting me pick your brain. Thank you for the updates on what you're seeing and between your management of portfolio and the brokerage business and, and we'll, we'll, we'll see. Well, I guess we'll both be able to hold our predictions, you know, see
- [59:49]
Jay
how people hold us accountable for what
- [59:50]
Interviewer
we've said over the next year.
- [59:53]
Sam Tenenbaum
Sounds great to me.
- [59:54]
Interviewer
The joy of our business. Well, thanks again for being on the program, Sam.
- [59:56]
Sam Tenenbaum
Thanks for having me, Jay. It's been a pleasure. Foreign.
- [60:19]
Jay
Big thanks to Sam for being our guest today. Thank you also to JPI, Madera, Funnel, Mercadia, ButterflyMX, Authentic and Telecloud for sponsoring this week's episode. Thank you to all of you for spending part of your day with us.
- [60:31]
Interviewer
We'll see you next time,
- [60:35]
Sam Tenenbaum
Sa.