Report: How Multifamily Operators Can Flourish in 2027
Prime leasing season has closed with more vacant space for rent than multifamily operators have seen in years, Zillow reported.
The national rental vacancy rate reached 7.3% in the second quarter, up from 7% a year earlier and from the 5.6% low the market hit at the end of 2021, according to the U.S. Census Bureau. Zillow noted that all that empty supply is why property managers kept competing on incentives.
Zillow said that according to its research, roughly 2 in 5 listings offered a free month, waived fees, or a similar perk in July, up nearly 4 percentage points from a year earlier.
According to Zillow, in the fall, teams close a season like that and turn to next year’s budget.
The numbers that explain last season are the sharpest guide to the next one, Zillow noted, including where the market is heading, not just where it landed, and that is what should decide how rentals are priced, how operators spend, and how they staff in 2027.
Zillow said that the market already is turning back toward operators. It said the surge of new apartments that gave renters the upper hand is fading and that today’s renter-friendly conditions have a shelf life.
Concentrate on Your Market
Zillow noted that the supply wave never landed evenly, so the national figure is a poor guide for any single property.
According to Zillow research, rents in San Francisco, where little new supply came online, are up 9.7% from a year ago, and only about a quarter of listings there carry a concession. In the Sunbelt, however, metros that built the most have deals everywhere: more than 65% of listings offer a concession in Charlotte, Denver, and Dallas, where rents are now flat or falling.
“The most expensive mistake I see operators make is treating the national headline as their business plan,” said Kara Ng, Senior Economist at Zillow. “A market with 20% empty units and a market with 4% empty units call for opposite approaches.”
Data to tell them apart is right there for free, Zillow noted. The brokerage said that reading it starts with the right yardstick.
The Zillow Observed Rent Index (ZORI) measures the asking rent on new leases, and accounts for the mix of homes listed in a given month. A rise or fall shows how much rents actually moved, not just whether more expensive or cheaper units happened to hit the market.
The perks operators offer deserve the same look, Zillow said, because they don’t all work equally. A reduced rent or a free month moves renters far more than a gift card, a parking credit or an amenity upgrade, Zillow said.
Heading into next year, Zillow said the useful question is not whether to offer something, but which offer fills a unit fastest in a market.
Plan For the Market That’s Coming
According to U.S. Census data, Zillow said that apartment completions already have peaked, and permits for new buildings ran 31% below their 2022 high in the second quarter. Less new supply means today’s renter-friendly conditions will not last forever, Zillow noted.
“Many things about next year are hard to predict, but apartment supply is not,” Ng said. “New apartments take years to move from permitting to leasing. Today’s slowdown in permits and starts means fewer new competition in 2027 and 2028. As the apartments already on the market are absorbed and fewer new ones come online, pricing power rebalances toward operators.”
