Why Multifamily Real Estate Deserves a Larger Allocation for the Decade Ahead

As of early August 2025, the U.S. stock market continues to hover near record territory. The S&P 500 closed at approximately 6,205 index points on June 30 and reached 6,306 by July 21, reflecting strong year-to-date gains. Yet beneath the surface, investors face a tug-of-war between optimism over a soft landing and caution over mounting recession risks.

Major surveys signal anxiety. In April, 93% of investors expected the S&P 500 to remain at or below 6,000 over the next year. Many warned of stagflation or a decline. At the same time, economists such as Mark Zandi argue the economy may be “on the precipice of recession,” citing weakening job growth, slowing construction, and trade policy risks.

Strategists at SocGen forecast the S&P could rise to 6,900 by the end of 2026. However, they caution that 7,500 may represent bubble territory, reminiscent of the dot-com peak. Morgan Stanley suggests that even a mild recession could lead to an equity rally, assuming rate cuts and policy easing begin to materialize.

The overall tone is clear. Equity markets show resilience, but valuation risks and macro headwinds remain a concern for long-term capital preservation.

Why Multifamily Real Estate Offers Institutional-Grade Protection and Growth

In this uncertain environment, multifamily real estate stands out. It offers robust downside protection, consistent income, and favorable long-term fundamentals.

1. Strong fundamentals with declining supply and resilient demand
Multifamily housing starts have declined by nearly 70% to 74% from their 2022 peak. Completions are expected to fall further through 2026 as financing remains tight and development slows. Meanwhile, national vacancy is forecast to end 2025 at approximately 4.9%, with continued rent growth of 2.6% nationally and more than 3% in select Sun Belt and coastal markets.

2. Cost-of-ownership dynamics favor renters over buyers
As of late 2024, average mortgage payments were 35% higher than average apartment rents. Even as interest rates begin to ease, this affordability gap is expected to persist, reinforcing long-term renter demand.

3. Price dislocation and acquisition opportunities
Valuations for existing multifamily assets have declined more than 20% from 2022 levels. At the same time, replacement costs remain elevated due to inflation in construction materials and labor. This creates a compelling spread between the cost to acquire stabilized assets and the cost to build, resulting in attractive entry yields for investors.

4. Family offices are increasing exposure
According to the Knight Frank Wealth Report, 44% of global family offices plan to increase their exposure to real estate over the next 18 months. Multifamily and industrial assets are top priorities due to their income resilience and inflation protection. This reflects a strategic pivot toward durable, real-asset allocations.

5. Financing conditions are stabilizing
The Federal Reserve has held rates in the 4.25 to 4.50% range. Markets are now pricing in a series of rate cuts starting in early 2026. As a result, borrowing conditions for multifamily are improving, providing greater predictability in underwriting and capital structure design.

Tactical Considerations for Structuring Multifamily Allocations

Final Thoughts

Equity markets may continue to deliver returns, but current valuations leave little room for error. Forecasts from SocGen and others assume a best-case scenario of easing rates and earnings recovery, which is far from guaranteed.

For the family offices we work with, multifamily real estate has proven to be one of the most resilient and strategic allocations within their broader portfolios. This is because multifamily, by contrast, offers structural inflation protection. Housing demand is demographic-driven and necessity-based, not speculative. Rental housing continues to serve as a durable hedge against volatility in public markets.

Unlike equities or fixed income, multifamily performance is not tied directly to corporate profits or monetary policy. The income is derived from essential services, not discretionary consumption. In this context, multifamily provides diversification, cash flow, and long-term appreciation potential.

For family offices with the capability to underwrite assets, partner with experienced sponsors, and take a patient capital approach, multifamily real estate remains a strategic asset that aligns with both growth and preservation mandates.

---