Navigating the Multifamily Market in ‘25: Q&A with Leste Group’s Ben Jackson 

The multifamily real estate market enters 2025 at a pivotal moment. After enduring a period marked by inflationary pressures, rising interest rates, and post-pandemic disruptions, the industry is well-positioned to address emerging challenges while capitalizing on new opportunities. While rental housing demand remains high, the outlook for multifamily properties will be influenced by a number of critical factors, including demographic shifts, economic conditions, and the changing regulatory landscape. 

Ben Jackson, director of capital formation, Leste Group, shared his views with Connect Money about the current state of the multifamily market, where the firm sees the greatest opportunities, and what the lending market will be like in 2025, among other areas of interest. 

Developers and investors are likely to face cautious lending environments, as banks and financial institutions assess the risk landscape more conservatively. 

Yet, despite higher interest rates and debt-to-equity ratios than in other segments of the real estate markets, he emphasized that opportunities exist in areas with limited supply, rising demand, and property values well below their peak.   

CM: How would you describe the current state of the multifamily market? 

BJ: After the Fed tightened interest rates aggressively from 2022 to 2023, capital markets became very restrictive, and transaction volumes plummeted as uncertainty spiked. With very few transactions occurring, price discovery became elusive, further dampening investor appetite. Higher borrowing costs, coupled with deteriorating operating fundamentals including higher vacancies, led to lower valuations. During this challenging period, operators turned their attention to asset management—efficiently managing costs, retaining tenants, and stabilizing their properties.  

Many of these themes persisted into 2024 as record deliveries of new supply arrived to the market, further challenging fundamentals. However, to the surprise of many, absorption of new supply was very strong throughout the year. We are finally starting to see new deliveries taper in several markets, and multifamily housing starts have fallen to a 10-year low, according to recently released U.S. Census data. This sets the stage for the multifamily market to return to equilibrium in 2025.       

CM: Where, geographically, do you see the most opportunities? 

BJ: Sun Belt cities with business-friendly environments, lower costs of living, and healthy job creation will continue to offer good investments. Miami in particular boasts a diversifying economy, strong population growth, low unemployment, and a favorable tax environment. While new multifamily construction in Miami is outpacing other cities in the Sun Belt and elsewhere, positive domestic and international migration is expected to continue for the foreseeable future.  

People are also increasingly moving from the Northeast and other areas of the country to Eastern Seaboard states with more temperate climates, including Georgia, South Carolina, North Carolina, Virginia, Maryland, and Delaware, leading to opportunities to invest in new multifamily developments that appeal to retirees and others relocating there.  

CM: Mortgage applications are back on the downswing as interest rates remain elevated – how is multifamily filling this need? 

BJ: As elevated mortgage rates and the ongoing housing shortage make home ownership unaffordable for more families in the U.S., the need for workforce and other multifamily properties will continue to rise. However, a recent pullback in new apartment construction may lead to higher rents in many markets beginning in 2025. 

CM: What factors contributed to multifamily properties remaining highly desirable in 2024, despite the anticipated challenges posed by escalating insurance costs? 

BJ: Rising single family home prices, coupled with a slowdown in development – due to such factors as rising borrowing costs and an increase in the price of building materials – have helped contribute to stability in the multifamily investment market. Furthermore, we believe there is a structural shortage of housing in the U.S. that will not be resolved in the short to medium term, making multifamily attractive for long-term investors.  

CM: What actions are you now undertaking at Leste Group to maximize the potential opportunities? 

BJ: We are looking to identify newer vintage properties with attractive pricing and strong fundamentals, particularly in markets with a robust, growing workforce and diversified economy. Acquiring attractive assets below replacement cost should enable strong investment returns going forward. 

CM: How much do other sectors (such as industrial, manufacturing, etc.) influence the multifamily sector? 

BJ: As the U.S. diminishes its dependence on international supply chains, we expect higher demand for industrial and manufacturing facilities to spur employment growth for many markets throughout the Sun Belt, leading to more demand for housing. 

CM: Tell us more about your management portfolio. Can you share any figures about demand at your properties? 

BJ: While each region is unique, overall demand for rental housing across our 4,000 units was relatively stable throughout 2024, which in large part is a testament to the quality of properties in our portfolio and the hard work and dedication of our property management teams. To counteract market weakness in specific markets, it was a year of rolling up our sleeves and really focusing on asset management to maintain occupancy amid record deliveries of new supply.  

CM: How will the lending environment change in 2025? 

BJ: There will be more opportunities for private investors to provide strategic capital to property owners and developers. This is particularly true for owners of properties with strong fundamentals who are struggling to survive in the current market due to higher debt service.  

Short-term loans will help provide a bridge to the improved operating environment expected in 2026, when multifamily supply tapers and positive absorption returns. As interest rates trend down, traditional lenders should gradually return to the market, providing support for increased transaction volume.  

CM: What housing issue(s), if any, is keeping you up at night?  

BJ: Affordability is an issue that affects many Americans. While wage growth has been actually quite strong, many people still struggle with the cost of living. Part of the solution is to provide more housing.     

CM: What do you see for the overall multifamily market in 2025 and beyond? 

BJ: While the multifamily market is expected to continue to face challenges in 2025, there will be a window of opportunity to acquire quality real estate in select markets at favorable prices. Those in a position to take advantage of the current environment, and make smart investment decisions, will be rewarded in 2026 and beyond.