‘Big’ investor demand for condo buildings

A model of this text first appeared within the CNBC Property Play publication with Diana Olick. Property Play covers new and evolving alternatives for the actual property investor, from people to enterprise capitalists, non-public fairness funds, household workplaces, institutional traders and huge public corporations. Join to obtain future editions, straight to your inbox.

Fundamentals within the multifamily condo market are weakening as a historic surge of latest provide continues to make its approach via the pipeline and rental demand falls again. On the similar time, investor demand for these properties is rising.

For instance, Camden Property Belief, a top-10 multifamily actual property funding belief, quietly started advertising and marketing its whole California condo portfolio — 11 properties valued at roughly $1.5 billion — just a few weeks in the past and has already had vital curiosity. 

“We’ve got an enormous demand for it proper now,” Ric Campo, CEO of Camden, advised CNBC. “Not two or three, however a whole bunch.”

Campo mentioned the corporate needs to focus fully on the Solar Belt, which is the place 90% of its properties at the moment are. 

“We expect the Solar Belt markets are going to — as soon as they recuperate, which ought to occur, we predict in ’26 or ’27 — they are going to be higher progress dynamic markets than California and our long-term money circulation progress, or web working revenue progress, might be higher concentrated within the Solar Belt than Southern California, so it is essentially why we’re promoting.”

As for the timing, he mentioned poor fundamentals are literally fueling demand. 

“You have had no lease progress, but you have had wage progress, and so affordability for flats throughout America has gotten higher,” Campo mentioned. “And on the similar time, for those who look again on the final 20 years, solely throughout actually difficult recessions or the monetary disaster have condo rents stayed flat for greater than a 12 months or two, and so the market believes essentially that there will be a flip available in the market.”

Rents began 2026 on a low be aware, with the nationwide median in January down 1.4% year-over-year, the biggest annual drop since September 2023 and the bottom January lease since 2022, based on House Listing. Rents at the moment are greater than 6% decrease than their final peak in 2022. 

Rents are falling due to rising vacancies. The nationwide emptiness fee was 7.3% in January, a document excessive on House Listing’s index, which dates again to 2017. Models are additionally taking a mean of 41 days to get leased, 4 days greater than in January 2025 and one other excessive for the index. 

“We’re previous the height of a multifamily development surge, however a wholesome provide of latest items are nonetheless hitting the market and colliding with sluggish demand, inflicting vacancies to proceed trending up,” mentioned Chris Salviati, chief economist at House Listing. 

Greater than 600,000 new multifamily items hit the market in 2024, probably the most new provide in a single 12 months since 1986. That got here all the way down to 500,000 in 2025, and 2026 is predicted to carry even fewer, however nonetheless above common.

“Whether or not or not market situations shift will now rely upon rental demand, whose outlook has grown shakier as a result of weak spot within the labor market and basic financial uncertainty,” Salviati mentioned. 

As fundamentals weaken, nevertheless, investor curiosity within the sector from each non-public capital and REITs is strengthening. Multifamily led all actual property sectors in 2025 deal-making, based on Moody’s. 

Mark Franceski, managing director of analysis and securities at Zelman & Associates, known as it “a defining battle.”

Trailing 12-month transaction quantity has elevated on an annual foundation for 14 consecutive months, regardless of primarily no change to capitalization charges, based on Franceski. 

“We nonetheless consider in it as secure and regular, and the long-term outlook is sweet, however fundamentals and traders level to the identical factor: weak spot,” Franceski mentioned.

Berkadia’s 2026 Multifamily Investor Sentiment Survey, which surveyed 249 traders to evaluate anticipated transaction exercise and alternatives throughout the sector in 2026, discovered that 87% of traders plan to reasonably or aggressively broaden their multifamily portfolios in 2026, “demonstrating cautious optimism regardless of ongoing challenges.”

As well as, a majority of traders (59%) count on reasonable rental progress within the multifamily sector this 12 months. Regionally, the Southeast, Midwest and Texas are forecast as the highest areas for multifamily funding, fueled by migration traits, affordability and business-friendly insurance policies, based on the Berkadia survey.

So how do you unpack the disconnect between the seemingly strong investor urge for food to personal flats and the comfortable demand fundamentals?

“They’re wanting via the softness at present to what they see as a greater setting tomorrow,” mentioned Samuel Sahn, managing accomplice and portfolio supervisor at Hazelview Investments, an Ontario, Canada-based agency with $11 billion in property below administration. 

“For these non-public entities which have cash to speculate and are taking a five- to 10-year lens, as a result of that’s the timeframe that they’ve of their non-public funds, they like what the world seems like in 2027 and past,” he added.

Sahn mentioned an anticipated upturn in family formation and sharply slowing multifamily development begins will in the end give landlords extra pricing energy for each new leases and renewals. 

Franceski, nevertheless, mentioned location (which is in fact an funding variable in all actual property) might be way more crucial than normal within the coming cycle. 

“I’d deal with [local] markets like shares. It is a market pickers’ market the identical approach the inventory market is. Persons are hyperfocused on areas and markets,” he mentioned. 

Analysts scrutinizing Camden’s California exit additionally consider state laws.

“The constructive is decreasing publicity from a closely regulated state versus CPT’s broader Sunbelt funding focus,” mentioned Alexander Goldfarb, managing director and senior analysis analyst at Piper Sandler.

That is precisely what Campo is arguing, regardless of some saying it overheated prior to now decade and is now overbuilt.

“The regulatory assemble within the Solar Belt is what drives Solar Belt progress. It is pro-business. It is a younger inhabitants, a extremely certified workforce,” Campo mentioned.

In the meantime, Franceski provided one other angle to the play: alternate options throughout the sector, like senior residing and scholar housing. These each fall below the multifamily umbrella and likewise see robust future demographic traits, particularly senior residing.

“All people’s acquired to reside someplace. The true focus is on strong operations and stability moderately than progress trade,” he mentioned.