— By Ben Galles of CBRE —
The Reno multifamily market started 2025 with a large supply of new Class A units that was delivered in the fourth quarter of last year. Despite some market challenges, leasing activity of the new supply has gone well, given the limited construction pipeline.
There are currently fewer than 700 market-rate units under construction, with very few projects moving forward and starting construction. The constrained development pipeline will likely lead to a significant decrease in vacancy in the second half of 2026 and beyond. This should also start to push rental rates higher, which have been static or slightly down for most of the year, as many owners have offered rent concessions to lock in new tenants.
While future market fundamentals are promising, many buyers remained on the sidelines because most deals have been presented at negative leverage. The average price per unit in 2025 (year to date) is down about 22 percent, while the price per square foot is down about 16 percent (year to date) from the previous year.
This is due to a few things. First, there was an increase in the number of Class B and C assets that traded compared to the same time period in 2024. These assets were priced lower on average, resulting in lower overall pricing.
Second, interest rates have remained at elevated levels, which has led to fewer 1031 Exchanges out of California than we’ve historically experienced, as well as fewer buyers obtaining bank financing. Interest rates for multifamily assets from most banks in 2025 were above 6 percent, even though the average cap rates of closed transactions have been around 5.75 percent. Most recently, Fannie and Freddie Mac SBL loans have been quoted at very aggressive rates, but those rates have been on larger, newer assets.
Increased cap rates and lower interest rates will certainly bring more buyers back into the market. Meanwhile, there doesn’t appear to be much distressed debt coming due on multifamily assets. As cap rates make a slow progression upward, new and existing investors will be well positioned for growth.
— By Ben Galles, Senior Vice President, CBRE. This article was originally published in the October 2025 issue of Western Real Estate Business.