Multifamily Resilience: What Class A vs. Class B Trends Tell Us in 2025

In 2025, the multifamily sector continues to navigate a complex landscape shaped by rising borrowing costs, evolving renter preferences, and uneven new supply. While Class A luxury developments face headwinds in many overheated markets, stabilized Class B and workforce housing are demonstrating resilience and attracting capital from investors seeking dependable cash flow and long-term growth.

Understanding these divergent trends is essential for sponsors and capital partners structuring equity and debt deals in today’s market.

Class A Occupancy Gains, but Rent Growth Falters in Oversupplied Markets

Data from CRE Daily shows Class A occupancy rates have recovered modestly across many U.S. metros after a challenging 2024. However, this increase in occupancy has not translated uniformly into rent growth, especially in markets experiencing a surge of new deliveries.

According to the January 2025 Fannie Mae Multifamily Market Commentary, cities with heavy new Class A supply—such as Austin, Phoenix, San Antonio, and Raleigh—have seen negative year-over-year rent growth. This oversupply challenges sponsors who carry significant leverage on newly developed luxury assets, requiring concessions and longer lease-up periods.

Class B Multifamily: Steady Demand in Supply-Constrained Metros

In contrast, Class B multifamily properties are demonstrating greater stability, particularly in supply-constrained markets. Fannie Mae and RealPage data highlight metros like Chicago, Cleveland, Cincinnati, and Louisville, where rent growth for Class B assets has remained robust—often ranging between 4.2% to 5.5% annually.

These cities benefit from slower construction pipelines and strong renter demand for affordable, well-located workforce housing. For investors focused on cash flow stability and lower risk, Class B represents an attractive opportunity amid ongoing market volatility.

Employment Growth Paints a Nuanced Picture

Employment growth remains a critical factor for multifamily fundamentals. The January 2025 Fannie Mae report identifies the top five metros for expected employment growth:

1. New Orleans

2. Orlando

3. Phoenix

4. Las Vegas

5. Austin

These markets are expanding thanks to sectors like tech, tourism, and logistics. However, it’s important to note that Austin and Phoenix—despite strong job growth—also contend with significant new supply, which has pressured rent growth in luxury segments.

Conversely, the bottom five metros for employment growth are:

1. Philadelphia

2. Baltimore

3. Cleveland

4. Omaha

5. Buffalo

Lower employment growth in these markets can translate into slower rent increases and reduced investor appetite, particularly for new developments or highly leveraged projects.

What This Means for Investors and Capital Partners

2025 is shaping up to reward capital that’s structured with discipline and local market insight. For sponsors and investors focused on multifamily, the safest strategy is targeting stabilized Class B and workforce housing in supply-constrained, moderately growing metros. These assets offer reliable occupancy, rent growth resilience, and reduced risk compared to speculative luxury developments in overheated markets.

Raising capital for a multifamily acquisition, refinance, or repositioning? At Estates of Elysium, we specialize in connecting sponsors and developers with private and institutional equity and debt tailored for workforce and value-add multifamily assets. Our expertise helps you build the capital stack that aligns with your strategy and market realities. Visit www.estatesofelysium.com to start your raise.