Quick Take: The 2025 real estate landscape is being impacted by shifting tariff policies and Treasury market volatility. Public apartment REITs, which posted a 20.5% return in 2024 versus 1.5% for private benchmarks, offer early insight into private market trends. As construction slows and absorption remains strong, Origin’s Multilytics® forecasts renewed rent growth through 2026 and beyond. Tracking public REIT performance, economic shifts and data-driven rent projections is key to understanding multifamily investment performance.
The real estate investment landscape in 2025 reflects a complex interplay of global policies and domestic economic shifts. Recent developments in U.S. tariff policies and the fluctuating Treasury market, particularly a weak Treasury auction last week, are rippling through public apartment real estate investment trust (REIT) performance. Understanding these dynamics is crucial: Public REITs often serve as an early, albeit volatile, indicator for the less transparent private apartment market.
The multifamily sector continues to face headwinds from suppressed private market transaction volumes (see my November 2023 Market Monitor on the same topic). Although they’re trending up from 2023, 2024 apartment sales remained below their peaks in 2021-22. The scarcity of private market data underscores the importance of monitoring public REITs for insights into potential pricing and sentiment shifts.
The Double-Edged Sword of Tariffs: Impact on REITs
Recent tariff policies, while aimed at specific trade objectives, have introduced significant uncertainty. As highlighted by Nareit, the initial announcement of reciprocal tariffs in early 2025 triggered a broad decline across equity REIT sectors. For apartment REITs, tariffs can impact the cost of imported materials like steel, aluminum and other components used in construction, renovation and maintenance. This can lead to:
Increased development costs: Higher material costs can raise overall costs of new multifamily projects, hampering new supply. This, in turn, supports rent growth for existing properties by limiting competition, a positive for REITs and private market valuations alike.
Higher operating expenses: For existing portfolios, maintenance and repair costs may rise due to more expensive imported materials.
Supply chain disruptions: Tariffs can disrupt global supply chains, leading to delays in material sourcing and project timelines, further impacting development pipelines.
While REITs generally derive less of their earnings from new development compared to private developers, the broader impact on the housing supply and operational expenses is a factor. As a UBS analysis noted, REITs are “relatively insulated from tariffs” compared to other equity market sectors. However, indirect effects, such as the potential for tariff-induced inflation and its impact on broader economic growth, remain a concern.
Treasury Market Tremors: The Weak Auction’s Ripple
The U.S. Treasury market remains particularly volatile. A notable weak Treasury auction, particularly for longer-dated bonds like last week’s $16 billion auction for 20-year Treasuries, sent broader yields climbing. A higher yield at auction signals weak demand, meaning the Treasury had to offer greater returns to entice investors to buy government debt. This event, coupled with concerns over rising national debt and ongoing fiscal debates, pushed the 10-year Treasury yield—a key benchmark for long-term interest rates—above 4.5%, a critical psychological barrier. While 10-year yields have since retreated, the benchmark rate’s volatility is creating challenges in investors’ ability to price risk assets.
The direct implication for real estate, including apartment REITs and the broader private apartment market, is that mortgage rates tend to follow bond yields higher. This rise in borrowing costs can:
Impact property valuations: When the cost of capital rises, the discount rate used to value future cash flows from properties increases, potentially leading to lower property valuations.
Reduce homeownership affordability: Higher mortgage rates make homeownership less attainable for a segment of the population, potentially driving more demand into the rental market. This could partially offset higher borrowing costs for both apartment REITs and private markets.
The volatility in Treasury yields also reflects broader investor uncertainty. That can lead to more cautious sentiment across capital markets, impacting both public REIT stock performance and the willingness of private investors to transact.
Public REIT Performance as a Leading Indicator for Private Markets
When evaluating the historical relationship between public and private market valuations, there is support that REIT stock prices often overcorrect—both up and down—during market dislocations relative to private market values. This can make them a leading indicator for future private market performance. The public market signaling of higher (or lower) implied cap rates through REIT valuations often precedes a similar, albeit more gradual, adjustment in private market valuations. Uncertainty from tariff policies and Treasury market fluctuations has clearly contributed to this divergence, as investors in the public market are quicker to price in perceived risks. Of note, apartment REITs have posted a solid recovery from their initial post-“Liberation Day” sell-off, with Camden (CPT) and Mid-America Apartment Communities (MAA) within 5.6% and 7.9%, respectively, of their April 2 highs. MAA even surpassed its April 2 high 30 days later but has since experienced pricing volatility due to the persistent macro issues previously mentioned.
Zooming out, in 2024, as reported by Nareit, apartment REITs produced a 20.5% annual return while the NCREIF-ODCE Index for apartments, which represents private real estate held by institutional investors, produced only a 1.5% annual return. Does this strong recovery in the public markets portend a sharp recovery in private apartment market investment performance over the coming months?
We think this is entirely possible, especially as operational performance is set to improve via sharp increases in rents following years of declining deliveries and continued robust absorption. After peaking in Q3 2024, new starts have fallen 35%, according to Newmark. This follows in lockstep the second-highest 12-month period for absorption in the past 25 years at 708,000 units, more than 3.5 times the long-term average. Demand recorded for Q1 2025 is the highest on record by a wide margin, representing 7.5 times the long-term quarterly average. Decreasing supply and strong demand are setting the stage for strong rent growth over the next several quarters.
Note: Demand is defined as the change in occupied units.
Sources: Newmark Research, RealPage
Navigating Uncertainty with Multilytics
In this environment of heightened uncertainty and dynamic market forces, a data-driven investment approach is paramount. Multilytics®, Origin’s proprietary suite of machine-learning models, provides granular forecasts for rent growth and other critical multifamily market dynamics.
Our models accurately predicted negative rent growth in 2023 and now project a return to positive year-over-year rent growth for multifamily markets, with average national rent growth reaching 1.7% by June 2025 and 2.36% by January 2026. We project many submarkets in our target Sunbelt and Mountain regions to experience mid to high single-digit rent growth in 2026 and beyond. It is not apparent that this level of growth is fully priced in yet in public REIT valuations.
The Road Ahead: Vigilance and Adaptation
While apartment REITs, as a public and liquid market, absorb the shocks of tariff policies and Treasury market fluctuations more immediately, their performance provides crucial signals for private market participants. Investors should continue to closely monitor:
Evolution of tariff policies: Any further changes, escalations or de-escalations will directly impact supply chains and construction costs.
Treasury yield movements: The trajectory of the 10-year Treasury will continue to dictate the cost of capital for all real estate investments.
REIT earnings reports: These will offer insights into how public companies are managing increased costs and adapting to the current environment.
Underlying fundamentals: Beyond the headlines, understanding granular rent growth, occupancy rates and supply pipelines is critical for discerning true value and identifying resilient opportunities.
