As investors look ahead in 2026, a few real estate trends stand out clearly in the data. You don’t need deep real estate expertise to understand them. Three fundamentals matter most:
- Fewer new apartments are being built
- Demand for rental housing remains steady
- Mid-priced (“Class B”) apartments tend to hold up better during uncertainty
Taken together, these factors help explain why Class B multifamily is often viewed as a durable option for passive real estate investors.
1. New Apartment Supply Is Slowing
Data from the U.S. Census Bureau and HUD shows a clear slowdown in new multifamily construction:
- Apartment buildings with 5+ units:
- Permits and starts are well below recent peaks
- Fewer starts today mean fewer new apartments 1–3 years from now
- Primary sources:
- Census New Residential Construction:
https://www.census.gov/construction/nrc/ - Federal Reserve (Census data – 5+ unit starts):
https://fred.stlouisfed.org/series/HOUST5F
- Census New Residential Construction:
Why this matters:
- Apartments take years to plan and build
- When construction slows now, competition later is reduced
Why Class B benefits most:
- High construction costs push developers to build luxury (Class A) units
- Class B apartments are rarely built new
- Most Class B supply already exists and is improved through renovations, not new construction
2. Rental Demand Remains Steady
Demand for rental housing continues to be supported by affordability realities:
- Census Housing Vacancies & Homeownership Survey shows:
- Rental vacancy rates remain relatively tight
- Homeownership is harder to achieve for many households
- Source:
https://www.census.gov/housing/hvs/current/index.html
Key drivers:
- Higher mortgage rates
- Elevated home prices
- Higher monthly cost of ownership compared to renting
Why Class B matters here:
- Serves renters focused on affordability and practicality
- Less dependent on lifestyle or luxury preferences
- Demand tends to persist even when the economy slows
3. Class B Apartments Tend to Be More Resilient
Not all apartments perform the same during economic stress.
Research from RealPage shows:
- Class B properties often:
- Maintain higher occupancy than luxury apartments
- Experience less volatility during downturns
- Source:
https://www.realpage.com/analytics/january-2026-data-update/
Why this happens:
- When budgets tighten, renters often:
- Move from expensive apartments to more affordable ones
- Stay in the rental market rather than buying homes
- This “trade-down” effect supports Class B demand
Market outlooks from CBRE reinforce this theme:
- In uncertain environments:
- Steady income matters more than rapid growth
- Day-to-day operations matter more than market timing
- Source:
https://www.cbre.com/insights/books/us-real-estate-market-outlook-2025/multifamily
4. What This Means for Passive Investors
For professionals exploring passive real estate investing in 2026:
- Class B multifamily tends to offer:
- Less exposure to new supply competition
- More consistent renter demand
- Historically steadier performance across cycles
- These investments are often structured around:
- Long-term ownership
- Regular income distributions
- Conservative assumptions rather than aggressive growth
This can make Class B a stabilizing element within a diversified investment portfolio.
Bottom Line: A Fundamentals-First Case
The case for Class B multifamily in 2026 is not speculative. It’s based on observable trends:
- Slowing supply (Census / HUD)
- Durable rental demand (Census HVS)
- Proven resilience (RealPage, CBRE)
For investors who value income, diversification, and a measured approach to real estate, these fundamentals make Class B multifamily worth understanding — even without specialized real estate knowledge.
Win Coleman, CCIM, is a graduate of East Carolina University where he received his bachelor’s degree in finance. He holds both North Carolina and South Carolina Real Estate Licenses and was awarded the prestigious CCIM (Certified Commercial Investment Member) designation in 2008.
Win served on the board of directors of The Triangle Apartment Association (TAA) where he co-chaired The Independent Rental Owner’s Council (IROC). He is a member of the International Council of Shopping Centers (ICSC), the Triangle Commercial Association of Realtors (TCAR) and the Raleigh Kiwanis Club.
While a specialist in site identification, evaluation and acquisition for investors and businesses, he also has extensive experience in brokerage, leasing, property management and investment sales.
Win assists in managing The Coleman Group, LLC, which owns a portfolio of investment properties, and he is a member of our acquisitions committee. He has lifelong experience and love for historic properties including the one he restored and where he resides in Historic Oakwood in Downtown Raleigh.