Feedback from the Pipeline
By Hunter Graul
As we close out the second quarter of 2025, the multifamily investment market continues to experience a slow and uneven recovery. Investor sentiment remains largely bullish, underpinned by strong long-term fundamentals such as population growth, household formation, and constrained new supply. However, despite widespread capital availability and a collective belief in the sector’s resilience, deal activity remains limited. The reason is simple: sellers and buyers are fundamentally aligned on where the market is headed, but divided on how to price that future today.
Sellers want to factor in anticipated rent growth and recovery trends into today’s pricing. Buyers, on the other hand, want to acquire assets at a discount that allows them to realize that upside over time. As a result, quality assets with true distress remain difficult to find, and transaction volume is being suppressed by this disconnect. In this environment, patience and creativity are critical. While headline distress has yet to materialize at scale, pockets of forced sales and dislocation are beginning to surface, particularly in the Class B and C segments.
Regional Market Analysis
In Dallas–Fort Worth, investment activity has picked up considerably, especially among institutional buyers chasing Class A assets. Year-one cap rates for these top-tier deals are trending in the 4.50 to 4.75 percent range, despite representing negative leverage in many cases. More generic suburban Class A assets are trading at 5.00 to 5.25 percent, often below replacement cost. Buyers in these segments are accepting short-term operational volatility in exchange for long-term rent growth potential. Class B assets, particularly those built in the 1980s, are trading in the 5.50 to 5.75 percent range, with pro forma upside via renovation. However, demand is more limited at higher check sizes, as equity is proving more difficult to raise. The Class C segment continues to show the greatest signs of distress, with assets trading in the mid to high six cap range. Many of these properties are experiencing significant operational issues, debt imbalances, and limited buyer interest. This is where the greatest near-term opportunity lies, particularly for buyers with the expertise and capital to reposition.
Austin’s market remains stagnant. Trades are limited, and nearly all transactions are occurring on a “per pound” basis rather than trailing cap rates. Suburban deals are trading in the $180,000 to $210,000 per unit range, while older Class B and C assets, though scarce in this market, are priced on pro forma stabilized yields in the 6.0 to 6.5 percent range. There has been little movement in the high-density, urban product segment due to the disconnect between replacement cost and what the market is willing to pay. We expect rents in Austin to stabilize and begin rising by spring 2026, making the next three quarters a potentially attractive window to acquire vintage assets at a meaningful discount to peak 2022 valuations.
San Antonio presents perhaps the most compelling near-term opportunity. New multifamily starts have effectively stalled, with zero new units breaking ground in the first half of 2025. This comes after an 80 percent decline in starts year-over-year, and positions the market for a significant supply shortage in the coming years. Class A assets are trading in the $160,000 to $190,000 per unit range with cap rates around five percent. Class B and C properties often forced to market by lenders are trading between $50,000 and $80,000 per door with pro forma yields underwritten in the seven to ten percent range. These assets typically come with operational or physical challenges, but the pricing reflects that risk. Several submarkets illustrate the pitfalls of undisciplined investing. With an overconcentration of low-quality assets has created a downward pricing pressure affecting even well-run properties. Our focus remains on well-located Class B and C deals in infill areas with strong demographics and manageable renovation requirements.
In Denver, the market is working through the absorption of recently delivered inventory. While headline distress is not yet visible, we expect that to change as more loans mature and owners face increased debt service requirements. For now, we are monitoring closely and maintaining dialogue with owners and brokers, particularly in the Class B and lower-quality A segments. Floating-rate loans and undercapitalized operators will likely present entry points later this year or in early 2026.
Salt Lake City is showing early signs of stress, particularly in outer-ring submarkets where recent deliveries have outpaced demand. Although transaction volume remains low, we are seeing growing misalignment between valuations and operational performance. Demographic trends in Salt Lake remain favorable, but investor caution has increased due to recent softness in rents and the increased cost of capital. We believe acquisition opportunities will emerge by late 2025 as distressed sellers are forced to meet the market.
Investment Strategy and Priorities
Across our core target markets, we are concentrating on distressed and underperforming Class B and C assets, particularly those built in the 1980s and early 2000s. These assets often suffer from deferred maintenance and management inefficiencies, but offer attractive upside through strategic capital improvements and operational turnaround. The current bid-ask gap is keeping many deals from clearing, but as lender pressure mounts and cash flow issues persist, we anticipate increased transaction velocity in the second half of 2025.
We continue to underwrite conservatively, focusing on intrinsic value and replacement cost metrics. Our underwriting emphasizes post-renovation yields, capital expenditure planning, and the ability to hold through volatility. Assets priced at a discount to 2022 values and located in supply-constrained infill markets remain our top priority.
San Antonio and DFW currently present the most attractive entry points for near-term deployment, with Austin and Salt Lake City requiring additional patience. Denver is firmly on our watchlist for late 2025 or early 2026 activity, pending further market softening
Looking Ahead
While transaction activity in the multifamily market remains constrained, the foundation is being laid for significant opportunity. Investors with conviction, flexibility, and local market insight will be best positioned to capitalize on the mispricing’s and distress that are gradually surfacing. At Platte Canyon Capital, we are actively engaging with lenders, brokers, and operating partners to identify actionable opportunities that align with our strategy. We expect the next twelve to eighteen months to be pivotal in setting the foundation for future returns.