Apartment Market Sees 7% Increase in Q1 2025, Reaching $30B in Sales Volume
Despite recent market volatility spurred by news on tariffs, the apartment market has continued to perform steadily. Contrary to the fact that the apartment sales volume has increased in Q1 2025 by 7% year-over-year, hitting $30 billion. This rise in multifamily investment marks the fourth consecutive quarter of growth.
Key Insights:
The prices for apartments have dropped by 0.9% in Q1. Cap rates have held steady at 5.7% over the last 5 quarters. Cap rates for both mid-rise and high-rise were 5.6% in Q1.
While garden properties saw a slightly higher cap rate at 5.8%.
Individual Asset Sales Lead the Charge
Single property sales were the primary driver of the market in Q1, approaching the average of $26.7 billion from 2015 to 2019. Specifically, individual asset transactions jumped 39%, reaching $25.7 billion.
MSCI has consistently highlighted single-asset sales as the best indicator of buyer sentiment. The continuous sales show that investors are willing to underwrite each property individually. On the contrary, the larger portfolio tends to be influenced by more complex factors.
These sales show that investors are willing to underwrite each property individually, while larger portfolio and entity-level sales tend to be influenced by more complex factors, such as broader portfolio strategies or financing conditions.
Shift in Market Composition
Although individual asset sales have rebounded to pre-pandemic levels, larger deals, including portfolio and entity-level transactions, remain below those historical benchmarks.
Between 2015 and 2019, megadeals accounted for about 25% of total volume. In Q1 2025, however, these deals made up just 15% of the market.
No entity-level deals were executed in the first quarter of the year, though portfolio sales grew by 18% year-over-year to $4.4 billion.
Property Type Breakdown
The Q1 had a significant surge in transactions for high-rise and mid-rise properties, with sale volume rising to 45% year-over-year to $12.3 billion.
The portfolio sales of mid and high-rise properties spiked 141% year-over-year, mainly due to a slow Q1 in 2024. Garden properties portfolio sales saw an increase of 22%.
Outlook
Contrary to economic fluctuations and shocks from factors like tariffs, MSCI’s reports show that the multifamily market does not really respond to these shocks in 1 quarter.
Scott Lebenhart, Chief Investment Officer at Ashcroft Capital, pointed out that market volatility in the bond sector has become a norm, especially in times of shifting interest rates. "For new acquisitions, it’s crucial to factor in some cushion in rates when underwriting deals,” he said.
The multifamily apartment market is on a growth trajectory in individual asset sales and strong performance. However, the broader volatility in the financial landscape is something to keep in mind, and investors are advised to stay cautious while factoring in changes in rates.
