After several years of rapid apartment construction and slowing rent growth, the U.S. multifamily sector appears to be entering a new phase: one bringing a gradual stabilization to this sector.
That is one of the highlights from the recently released first quarter 2026 U.S. Multifamily Report from Colliers, which says that apartment fundamentals are beginning to rebalance as the pace of new supply starts to slow and demand from renters remains high thanks in part to the high costs of single-family homes.
According to Colliers’ report, the national apartment occupancy stood at 95.1% in the first quarter, almost unchanged from the previous quarter and only slightly below the 95.2% recorded a year earlier. At the same time, effective monthly rents averaged $1,934 nationally, up from $1,894 a year ago, even as year-over-year rent growth remained sluggish.
One factor continuing to support apartment demand is the growing affordability gap between renting and owning a home. High home prices and elevated mortgage rates have kept many potential buyers on the sidelines, extending renter tenure and maintaining demand for apartments.
National absorption reached more than 85,000 units during the first quarter, outpacing the roughly 64,500 new units delivered during the same period. That marks a notable improvement from late 2025, when absorption turned negative as supply temporarily overwhelmed demand.
Perhaps the most encouraging trend for apartment owners and investors is the slowdown in new construction.
Colliers reported that 501,117 units were under construction nationally at the end of the first quarter, down significantly from more than 573,000 units a year earlier. Developers continue to face higher financing costs, tighter lending standards and increased construction expenses, all of which have reduced new starts.
The result is a supply pipeline that is becoming easier to digest.
While Sun Belt markets such as Dallas, Houston, Phoenix and Atlanta continue to face elevated supply levels, many Midwest markets are benefiting from more restrained construction activity. The report notes that Midwest and select coastal markets are generally seeing stronger occupancy performance because they are not dealing with the same level of new competition.
Chicago is a prime example. The market posted a 96.3% occupancy rate in the first quarter, above the national average, while effective rents increased 3.5% year-over-year to $2,240 per month. Milwaukee also turned in strong performance, recording a 96.3% occupancy rate and 2.1% annual rent growth.
Investors are taking notice.
According to Colliers, capital remains available for multifamily acquisitions, though buyers are being highly selective. Investors are focusing on markets where supply pressures are easing and long-term fundamentals remain strong. Cap rates have largely stabilized in the mid-5% range nationally, helping restore underwriting confidence.
The report also notes that refinancing challenges are creating selective investment opportunities. Distress is beginning to emerge in some markets, particularly among assets burdened by floating-rate debt or aggressive value-add business plans. However, Colliers emphasized that distress remains localized rather than widespread.
Looking ahead, the firm expects 2026 to serve as a transition year for the apartment sector. As deliveries taper and absorption gradually catches up, fundamentals should continue to improve.
Rather than a dramatic rebound, though, Colliers forecasts a gradual recovery that will vary significantly by market.
