Renters are increasingly choosing to stay put rather than venture into the unknown, where elevated home prices and broader economic volatility await.

Apartments are staying full longer as high mortgage rates and limited inventory keep renters in place.

Historically, about half of apartment renters choose not to renew their leases. In the first quarter of 2025, that number has dropped to between 30% and 35% in the portfolios of major multifamily landlords, according to Piper Sandler Managing Director of Research Alex Goldfarb.

Large multifamily REITs have reported some of the lowest turnover rates in their companies’ history in recent calls with analysts, like Equity Residential, which reported a 7.9% turnover rate in the first quarter. 

“We’ve seen price growth still put a lot of burden financially on families and individuals across the country,” National Apartment Association Vice President of Research George Ratiu said. “With volatility and uncertainty, I think a lot of folks renting might choose to take what I would say is the certainty of rent over making a long-term commitment.”

Major REITs like Camden Property Trust reported a 31% annualized net turnover rate in Q1, one of the lowest in its history. Essex Property Trust said its turnover landed at 35%, below the company’s long-term average.

Marcie Williams, chief strategy officer of The Bainbridge Cos., which develops, acquires and manages multifamily properties nationwide, is seeing roughly two-thirds of tenants stay put at many of its communities.

“That [retention rate] is extremely high,” Williams said. “I’ve been in this business over 30 years, and that is definitely not typical overall.”

Since President Donald Trump’s “Liberation Day” tariff announcement at the beginning April, price expectations and trade policies have seesawed, prompting fears of a trade war and heightening economic uncertainty. 

Consumer confidence plunged to a 13-year low in April, prompting many commercial real estate professionals to prepare for a recession. But that hasn’t impacted apartment owners, and some see them as a clear winner in an environment with costs spiking. 

“There are a few stories of residents expressing concern due to job loss, but nothing at the moment that is impacting any of our stats, results or projections for the next 90 days in the market,” Equity Residential Chief Operating Officer Michael Manelis said on his company’s first-quarter earnings call. 

Manelis said even in D.C. and Northern Virginia, where federal government job losses are having an outsized economic impact, Equity’s complexes are more than 97% occupied.

But multifamily turnover has been shrinking for the past two years, driven by rising home prices, high interest rates and a shift in renter preferences toward more livable and amenity-rich spaces — a change that began during the pandemic, Goldfarb said.

Less than a third of renters are looking to buy a home within the next five years, according to a survey conducted by Gallup. The cost of homeownership, including the down payment, was cited as the biggest barrier for renters trying to break into the housing market.

“It’s really just the uncertainty with the economy and still the high barriers to entry, with higher interest rates and higher down payments, that has allowed our residents to be able to enjoy the service that we provide and the apartment home that they currently live in,” Williams said.

For landlords, that stability is a win. Lower turnover reduces operating and maintenance costs — typically ranging from $750 to $1,800 per unit — as well as marketing expenses and vacancy loss, since each unoccupied day results in lost revenue, she said.

“There really is nothing negative that comes from having lower turnover,” Williams said.

The bulk of move-outs and lease expirations occur in the spring and summer, Ratiu said, so lower turnover rates at the beginning or end of the year are more common. But turnover is expected to stay low during peak move-out season, even with new units continuing to come to the market, Goldfarb said.

After eight consecutive quarters of record apartment deliveries, completions have fallen from 153,000 units at the end of 2024 to 116,100 units in the first quarter, according to RealPage.

“This year is the second and final year of this outsized supply wave that we’ve seen, primarily in the Sun Belt,” Goldfarb said. “But last year, we had a big supply [increase], and yet turnover declined. So I don’t see any reason why turnover should increase as the second wave of supply delivers.”

With fewer move-outs, owners of the new apartments that have come online are fighting to get in on the action and competing more aggressively for tenants.

That is driving up concessions on new leases, sometimes as high as two months of free rent and $1K gift cards, especially in Sun Belt cities like Jacksonville and Charlotte, Williams said.

“When those properties are 0% occupied, competing with an apartment community that’s 95% occupied, they have to have those concessions to keep up the velocity and the velocity you know you want to make,” Williams said.

But deliveries are expected to fall 14% in 2025, according to Multi-Housing News, tipping the balance of power back toward landlords. With fewer new options coming online and renters growing hesitant to move out, prices are expected to start rising.

“The landlord goes, OK, how much do we think we can raise rent before we raise too much that the person just says, ‘The heck with it, I’m out?’” Goldfarb said. “And I think most people would agree that the mental cost of moving exceeds the actual dollar amount.”

Fitch Ratings said its overall U.S. CMBS delinquency rate increased nine basis points to 2.42% in May from 2.33% in April 2024 due to maturity defaults of several large regional mall and office loans. Led by the $255-million maturity default of a loan backed by a 980,711-square-foot portion of Providence Place Mall (pictured) in Providence, RI, the retail and office delinquency rates increased by 32 bps and 26 bps, respectively, last month. 
 
New 60-day-plus delinquency volume totaled $1.32 billion in May compared with $1.49 billion in April, Fitch said. Office loans accounted for the largest share of new delinquencies (44%; $588 million), followed by retail (41%, $536 million) and hotel (11%, $139 million). Maturity defaults accounted for 77% ($1.02 billion) of new delinquencies, while term defaults represented 23% ($305 million). 
 
Resolution volume increased to $771 million in May from $569 million in April, according to Fitch. May resolutions included $616 million of loans brought current, $24 million of loan liquidations and $131 million of loans previously 60+ days delinquent removed from Fitch’s index that are now 30 days delinquent.  

Using a different yardstick from Fitch, Trepp reported that the CMBS delinquency declined by 10 bps to reach 4.97% as May ended. The improvement was driven by about $2 billion of office loan resolutions during the month. Year-over-year, though, delinquencies in May were higher compared to 3.23% in May 2023, according to Trepp data.

Crescent Communities’ Harmon Foxbank build-to-rent neighborhood on the outskirts of Charleston, South Carolina.

A major Southeast commercial real estate developer is teaming up with Chicago-based investment management firm Heitman to spearhead more than $200M in new single-family build-to-rent homes across four states.

Charlotte-based Crescent Communities and Heitman, along with an unnamed state pension fund, plan to start construction this spring on Harmon by Crescent Communities rental neighborhoods in North Carolina, Texas, Tennessee and Arizona, the company announced Thursday. 

The initial $235M investment will erect new three- and four-bedroom townhouses and single-family detached home communities full of amenities that will be offered for rent only, according to the press release.

“The expanding relationship with Heitman during a very challenging capital markets environment is a testament to this growing sector and the confidence in our brand,” Crescent Senior Managing Director Tony Chen said in the release.

Crescent is known for its Novel apartment brand and also develops and owns office, industrial and life sciences real estate. It first entered the build-to-rent category three years ago when it teamed up with Sumitomo Forestry’s DRB Group as its builder, with plans for communities in Atlanta, Charlotte, Raleigh and Charleston.

The Heitman partnership comes as build-to-rent is hitting a new peak. Developers unleashed 27,500 for-rent houses in 2023, 75% more than 2022, according to data compiled by RentCafe. More than 45,000 build-to-rent homes are underway in the U.S., with the bulk projected to deliver in 2025. Phoenix has the biggest pipeline with 4,000 units, followed by Dallas and Atlanta.

The industry is surging due to the high hurdle both prices and interest rates have placed on households to buy their own dwellings, along with the ongoing housing shortage. The build-to-rent platform gives households the space and features of single-family living without the capital outlay for maintenance and upkeep, industry experts say.

“We believe demand fundamentals for single-family rental housing will continue to grow at an attractive pace,” Brian Pieracci, head of North America private equity at Heitman, said in a statement. “Over the next decade, we expect a growing number of older millennials and retirees to rent as median home prices have grown at twice the pace of median incomes since 2000, making home purchasing less attainable and far less desirable.”

Two big players in life sciences investing and development, Charlotte-based Trinity Capital Advisors and California-based Foundation Capital Ventures, are seeking to expand nationally and work together on projects.

Courtesy of Hanbury Architecture

A rendering of Spark LS, a $1B life sciences campus planned for the Research Triangle.

The partnership, known as Foundation, will be led by Trinity Managing Partners Denis Sullivan, Scott Altick, Walker Collier and Jeff Sheehan. Significant focus will be placed on recapitalizing existing assets, Sullivan said. Trinity was a significant buyer of defaulted loans during the Global Financial Crisis.

The two firms first collaborated on Park Point LP in Durham, North Carolina, and Spark LS, a $1B, 109-acre mixed-use life sciences campus in the Research Triangle Park region. Trinity had seen success in the RTP market, Sheehan said, and began looking for a partner to make a move to go national. 

Trinity boasts a 3M SF portfolio in the Research Triangle, including the 911K SF Southport Innovation Center in Morrisville, North Carolina, and the 265K SF Venable Center in downtown Durham.

Sheehan said he sees opportunity in utilizing the firms’ combined relationships with tenants. It would be an obvious move to help those doing research and development in the three biggest life sciences markets find space to commercialize and expand in North Carolina, taking advantage of the region’s biomanufacturing strength. 

“We’re also really excited about the amount of early stage research that is coming to North Carolina, acknowledging the skilled workforce that’s available,” said Sullivan, a former BioMed Realty chief investment officer.

But while there are opportunities in this environment, it is important to be selective.

“We think that going forward, you’re really going to have to be a stock picker, in terms of which projects you select,” Sullivan said. “And we really see a value in having a proven track record as an operator from both a tenant and a lender perspective.”

As utilities in major data center markets struggle to keep up with the industry’s energy consumption, data center developers are increasingly building far beyond the borders of the sector’s traditional hubs.

The rapid growth of the data center sector in North America has largely been concentrated in just a handful of markets: Northern Virginia, Silicon Valley, Dallas, Atlanta, Chicago and Phoenix.

But experts say a growing share of new development is happening outside the industry’s traditional boundaries, with second- and third-tier markets accounting for an increasingly large share of growth. Developers are launching a growing number of large-scale data center build-outs, often on spec, in markets like Reno, Nevada; Des Moines, Iowa; Austin, Texas; and Columbus, Ohio — and they’re finding tenants eager to snap up this new capacity.

Driving this surge in demand in secondary and tertiary markets is the sector’s voracious appetite for power, which is significantly outpacing the ability of utilities in the industry’s largest markets to provide it. Data center providers and their tenants are looking for readily available power anywhere they can find it, and that increasingly means going to markets that may not have been in the conversation just two years ago.

“Clearly, the demand conversation is becoming much more geographically diverse than it ever has been before,” said Chris Downie, CEO of colocation data center provider Flexential, speaking at Bisnow’s DICE East event last week at The Ritz-Carlton in Tysons, Virginia. “We’re seeing large-scale demand sets across markets like Hillsboro, Oregon, and Atlanta and Denver and then a ripple effect on Raleigh and Charlotte and in Nashville.”

Bisnow

Flexential CEO Chris Downie speaks at Bisnow’s DICE East. He is joined by Akerman’s James Grice, Credit Suisse’s Sami Badri, Sabey Data Centers’ Rob Rockwood and Cato Digital’s Dean Nelson.

This shift toward secondary and tertiary markets was reflected in first-quarter leasing numbers. A report released last month by industry analyst group Data Center Hawk showed absorption in North America increasingly spread over multiple markets instead of being concentrated almost entirely in the traditional hubs. 

“Demand has spread out with multiple markets representing a substantial portion of overall absorption,” the report states. “Some companies that were considering Northern Virginia for their requirements are now opting for alternative locations such as Atlanta or Columbus. Similarly, requirements in California are shifting towards cities like Las Vegas, Salt Lake City, or Denver.”

Experts attribute the trend to the fact that primary data center markets are running out of power.

In Northern Virginia, utility Dominion Energy had to delay power delivery to multiple projects in the heart of the industry’s largest market last year due to insufficient transmission infrastructure, while California’s Silicon Valley Power may not be able to energize new data center substations until 2029. Similar constraints are suddenly on the horizon even in newer data center hubs like Phoenix and Atlanta, while a recent CBRE report pointed to looming transmission problems across multiple markets, from Dallas to Central Washington. 

“Available capacity in all of these major Tier 1 markets is becoming strained: look at the Bay Area and Virginia,” said Dean Nelson, CEO of Cato Digital, speaking at DICE East. “There’s just constraints everywhere — and by the way, it’s about to get worse.”

One year ago, a lack of robust fiber connectivity or concerns about the local labor force in a smaller market might have been disqualifying. Now, as long as low-cost power is available, developers and their investors are increasingly willing to shoulder the added costs of addressing these issues to build new inventory on spec, confident the demand will be there.

“It’s just all about availability of power. That’s the first criteria before you go down to whether there is fiber nearby or if there’s a good pool of labor resources and all the other things that used to be higher up on the list from a site selection perspective,” said Ali Greenwood, executive director in Cushman & Wakefield’s data center group. “You hear about flight quality in office — you’re seeing flight to power here.” 

Although noncore markets are likely to see a growing share of development and demand, experts say that the industry’s central hubs aren’t going anywhere. Indeed, Northern Virginia added five times more inventory in 2022 than the fastest-growing secondary market, according to CBRE. 

Hyperscale tenants, in particular, will continue to place enormous value on clustering at least some of their computing infrastructure in dense primary markets, where closer proximity allows faster processing times needed for certain applications. So even as the data center landscape decentralizes, experts say these core markets will continue to grow as fast as the supply of power allows. 

“If you’re talking about cloud or very scaled customers, they probably really care about Tier 1 markets — those concentrations or densities, but if you’re talking about enterprise customers, they probably would like to be a bit more distributed in nature and they don’t need these very sensitive epicenters to do what they need to do with their workloads,” Credit Suisse Managing Director Sami Badri said at DICE East. “The significance of Northern Virginia obviously is going to be maintained, but the level of openness to expand to other markets has never been better.”