Quick Take: Tariffs and macroeconomic uncertainties are reshaping the landscape for private equity multifamily investing. Decision-making around capital investment and development has slowed, amplifying economic unpredictability and increasing the likelihood of a shallow recession. Multifamily assets, however, remain resilient due to rising rents and a housing shortage. Reduced development and constrained supply suggest promising opportunities for long-term growth in multifamily projects.
Last week, I hosted a pivotal webinar focusing on tariffs, joined by analysts Julia Georgules and Lauro Ferroni of JLL. Together, we unpacked how tariffs and other macroeconomic uncertainties are shaping the landscape for private equity multifamily investing.
It’s too early for data that directly measures the economic impact of the tariffs. But one theme clearly emerged: how much tariffs appear to have amplified unpredictability and frozen decision-making around capital investment, inventory and expansion. I believe this paralysis could continue for months to come, constraining GDP growth, dampening economic activity and significantly increasing the likelihood of a recession. However, it’s more reasonable to anticipate a shallow recession rather than a downturn akin to 2008.
The Pre- and Post-Tariff Environment for Multifamily
Before sweeping tariffs took effect on April 2, the backdrop for the multifamily sector was positive. JLL cited a 52% increase in the number of U.S. lenders quoting on loans over $100 million in Q1 2025 compared with the second half of 2023. As well, bidding volume from institutional investors flowing into the U.S. multifamily sector had increased 78%. Additionally, capital providers were anticipating deploying 10% to 25% more into commercial real estate in 2025 versus last year. Now, JLL is seeing a more defensive posture, with loan spreads widening and more investors underwriting to potential recessionary scenarios.
One dynamic I believe could counterbalance inflationary pressures created by tariffs is the effect of reduced development on construction costs. With a significant slowdown in new projects, subcontractors and contractors are losing the pricing power they held during 2021 and 2022. This could, in turn, offer opportunities for disciplined investors and developers.
But emerging trends, if there are any, are opaque. I continue to see lenders offering aggressive debt terms. As a borrower, in the past two weeks I’ve received some of the best term sheets we’ve seen in years. On the flip side, equity investors are pausing their own commitments as they await clarity on the broader economic picture. These mixed signals create tension and extend decision timelines, ultimately slowing overall growth. All this leads to further stagnation in new investment activity.
Adapting Investment Strategies
Even given the current uncertainty, I don’t see paralysis as a useful option. Many people have heard me say this: When conditions change, you don’t stop investing. But how you invest must align with the reality of current market conditions. At Origin, we’ve shifted our focus slightly toward credit investments for additional protection and are underwriting new development projects with a minimum 30% margin of safety.
By targeting a 6.5% unlevered yield in markets where cap rates are hovering near 5%, we believe we have created a buffer large enough to withstand rising cap rates or unexpected changes in construction costs. This margin protects downside risks and positions us to capitalize on upside potential as conditions stabilize.
In our March Market Monitor, we examined potential cost increases in construction and materials. In a scenario analysis of a ground-up garden development in the Southeast, we calculated that the increases in lumber, metals and drywall, among other materials, would add 2.4% to the total project budget. We heard from another developer who estimates that their own hard costs—materials, labor and equipment—would increase by 2% to 3% if all tariffs were enforced in a more competitive purchasing environment. If the current 90-day pause results in minor increases in tariffs, that impact would decline to 1% to 2%.
Looking Forward: Interest Rates, Distress and Key Data
Longer term, I expect that the inflationary impact of tariffs is likely to keep interest rates sticky or even slightly higher. At Origin, we are using fixed-rate borrowing and interest rate swaps to mitigate these risks, but the reality is that cap rates remain a wild card, influenced by the broader environment.
Economic uncertainty increases the probability of distress in some areas, and distress is always a risk in a low-growth environment. But I remain confident in the resilience of quality multifamily assets. Rising rents, driven by the ongoing housing shortage and heightened demand for rental housing, act as a stabilizer even in volatile conditions. This is why I believe multifamily is well-positioned to outperform relative to other asset classes.
Over the next few months, we are all in the same position—awaiting the first data points that can shed some light on the real impact of tariffs on the multifamily sector in particular. My webinar guests from JLL said they would be tracking any capital market-specific data points, including the average number of bids per transaction in each week and the number of deals the firm is launching week over week. They’ll also be looking at loan volumes and average price movement during the bidding process across different property sectors.
Optimism in Development Opportunities
Despite the headwinds, I remain bullish on development. The current environment could yield substantial long-term opportunities for well-positioned projects: The housing market remains deeply underbuilt, and the supply constraints created by today’s slowdown will only exacerbate the imbalance in the coming years.
We’ve modeled the potential for significant rent growth in 2026 and beyond. And while nothing is guaranteed, all signs point to a structural shift favoring multifamily investments. Proper underwriting and a commitment to sound fundamentals are non-negotiable. But opportunities abound for those willing to weather today’s uncertainty in pursuit of tomorrow’s growth.
No one can predict the future with certainty. But the ability to adapt, strategize and anticipate long-term trends separates successful investors from the rest. Tariffs have introduced challenges, but they have not altered the fundamental drivers of multifamily real estate.
