According to a Berkadia survey, first reported by Commercial Observer, 61 percent of the capital providers and executives from large private real estate investment firms surveyed characterised their expectations for the multifamily market in the second half of 2026 as negative. The volatility in capital markets is a decisive factor here. In parallel, 52 percent of respondents stated that this asset class performed worse in the first half of the year than they had originally anticipated.
Josh Bodin, Senior Vice President of Capital Markets Strategy and Trading at Berkadia, noted in a conversation with Commercial Observer that six months ago, investors were very optimistic that volatility would subside and transaction activity would increase. Instead, the operating environment has been significantly more uncertain, interest rate volatility has persisted, and property performance has remained weaker than forecast.
Indeed, bond yields remained high for most of 2026. The 10-year US Treasury yield is currently at 4.7 percent, its highest level since 2023, while the 30-year Treasury yield has reached 5.2 percent, a 20-year high. A separate report from CBRE also showed that multifamily investment sales reached $29.5 billion in the first quarter, a 6 percent decrease year-on-year. Although the second quarter saw an increase in investment sales to $34.9 billion, it was still 2.7 percent below the previous year's figure.
However, Bodin emphasised that these metrics and investor sentiment have not led to a general loss of confidence in multifamily as an asset class. Rather, investors' perception of execution risk has changed. In this context, the Berkadia survey found that 82 percent of investors plan to expand their portfolios in the coming months, and 83 percent expect market conditions to improve by the end of 2027.
Josh Bodin highlighted that, on the positive side, new construction completions are beginning to moderate in many markets, capital remains available for well-positioned assets, and investors are increasingly expecting an improvement in conditions. The Berkadia survey also revealed that nearly 50 percent of responses assumed an expansion of the exit cap rate by 25 to 50 basis points, while nearly 75 percent now anticipate rental growth of no more than 2.5 percent by the end of 2027.
Investors are currently scrutinising rental growth assumptions, exit cap rates, financing structures, and their business models more closely than at the beginning of the year. They are demanding stronger fundamentals, more realistic pricing, and greater downside protection before deploying capital. Although investors are generally positive about multifamily, they are acting more cautiously in individual transactions. They are prioritising core and core-plus credit and debt strategies over value-add and opportunistic deals.
One region that enjoys particular investor confidence is the US Midwest. The Berkadia survey showed that 58 percent of investors and executives preferred the Midwest over the Southeast and Mid-Atlantic states, which received support from 52 percent and 46 percent of respondents respectively. Bodin explained that the Midwest exhibited year-on-year rental growth of 4.6 percent, while the Northeast was at a low 3.2 percent. This underscores the Midwest's position as a capital target for 100 surveyed clients seeking stable cash flows there.
