The multifamily market has changed dramatically in the last two years.
Before, interest rates were low, capital was flowing freely, and inefficiencies were hidden or made irrelevant by a hot market.
Today, multifamily owners face six large market challenges that they must find a way to address if they wish to keep — or improve — their position in the industry.
In this piece, we’ll explore:
Multifamily owners have faced a 9.3%+ annual increase in expenses in recent years, driven by multiple factors:
At the same time, rent growth has stagnated for nearly two years with a 1% nationwide average increase in 2024 — far below the 9%+ increase in costs.
Once a property is 5+ years old, its CAPEX needs dramatically increase with age. Yet only 8% of U.S. apartment buildings were built in the past 5 years — and over half (52%) of U.S. apartment buildings are 20 - 50+ years old, with a median age around 37 years old.
The takeaway is clear. The majority of multifamily properties are in need of significant, costly repairs, maintenance, renovations, or redevelopment.
Multifamily has a property data problem. Based on data quality studies and BIM usage, less than 10% of multifamily assets may have accurate, complete records.
Very few multifamily properties are fully modeled during construction, let alone after acquisition. An older survey found that only 7% of BIM users were in multifamily, and more recent research found 71% of multifamily builders considered BIM “irrelevant”.
The property data that multifamily owners do have is often scattered, siloed, and fragmented. In one example that was presented as “not the exception”, one multifamily owner stored data for 40 properties on 40 different software platforms.
Because of this, it takes too much time and effort to gather baseline information on any property, and that data is often inaccurate, out-dated, or incomplete. This leads to excess timelines and inaccurate decisions and spending at every level.
Most property-level information is never documented. It lives in the head of front-line staff like property managers and is lost when they leave — which is often. On average, a property manager only holds their position for 19.2 months, and the NAA found roughly a third of multifamily property management staff turnover every year.
Even when property managers do stay, they often feel understaffed and burned out. This leads to longer response times, lower quality maintenance and capital projects, fewer lease renewals — and nearly $4,000 to replace each lost resident.
Cap rates have increased from 4.1% in 2021 to ~5.2% in 2025. During this same period, we’ve seen transaction cap rates land .8 - 1.1% higher than appraisal cap rates.
There are multiple downstream challenges created by this. Property values have declined ~20% from their peak in 2022 due to cap rate increases. There’s a disconnect between appraised and deal valuations. Transactions are improving but remain sluggish compared to historical peaks. And it is more challenging to attract capital to deals and achieve NOI targets across the life of a property’s hold period.
Some large multifamily owners are struggling to streamline and update how they operate. Most large players in the space have suffered drops in earnings and valuations in recent years, and are re-focusing on consolidation and balance-sheet fundamentals to turn things around, instead of process or technology innovation.
Traditionally, large multifamily owners invest less than 1% of earnings into R&D and innovation, compared to 3-7%. Owners typically do not even have R&D and technology as a standalone line item in their budgets, and instead draw from OPEX and CAPEX budgets for technology, resulting in industry-wide underinvestment.
Many multifamily teams are still using manual processes, paper, and excel spreadsheets to manage dozens or hundreds of capital projects each year. Other teams are managing these projects with tools like Procore that are designed for one-off, ground-up new development and not relatively small Capex work.
Multifamily teams aren’t using outdated processes and 30+ year old technology because they want to — there just have not been tools built to manage low-complexity, high-frequency capital projects. This compounds with lack of investment and holds back teams that want to innovate, but don’t know how.
These challenges are impacting every multifamily owner to some degree — and the next 18 months will separate the winners from everyone else.
The winners will tackle these challenges head-on. They will find a way to address each in order to easily maintain their position, or to even grow within today’s rocky market.
Everyone else will choose to simply ride out the storm. By doing so, they will either struggle to stay in place, find their position eaten away by their peers, or give ground to the leaner, hungrier upstarts entering the industry.
Next, we’ll detail how to solve each of these challenges.
You have no control over interest rates, insurance premiums, material costs, the labor supply, or nationwide rent stagnation. When they go up, they go up for everyone.
You do have control over:
Time doesn’t care about rising construction costs or frozen renovation budgets. Sooner or later you will need to perform significant CAPEX work on your assets.
Even if you do not have major work scheduled for the next 18 months, now is still the time to rethink how you plan, bid, execute, track, and close-out your capital projects. Anything you can do to streamline, accelerate, and cut costs from these projects is guaranteed to save you time, budget, and headaches down the road.
Missing property data forces you to spend hours digging for existing property measurements, weeks repeating sitewalks, and months waiting for models to be drawn. Or — even worse — it forces you to move forward with incomplete information and risky assumptions about a property’s basic dimensions and state.
There’s no shortcut here. To avoid these delays and uncertainties, multifamily owners need to get serious about creating standardized BIM records for every property they own, and then storing all records on a single platform. This will require upfront work — especially for larger portfolios — but it will save a lot of downstream problems.
Part of this is covered by the above point. Creating standardized, centralized BIM records and models goes a long way towards understanding what you own.
Yet there are additional levels of detail that can be added to these records to create persistent sources of truth that resist staff turnover. Digital property records can — and should — include work histories, catalogues of major appliances and systems, EUL/RUL data for anything that must be repaired or replaced, and other property-level detail that lives in the filing cabinets and heads of property managers.
Like interest rates, insurance premiums, and other market-wide costs, rising cap rates create a lot of problems that you cannot directly do too much about.
However, one problem is in your control — the impact of cap rates on property values. Focus on improving NOI through the levers you control to regain the value lost from rising rates. For example, a relatively small reduction in Opex of a few thousands dollars per year can offset a full percentage increase in cap rates.
One you can control, the other you can’t. Once again, focus on what you can.
All of the above points rely on adopting new technology. Most large multifamily owners have already done everything they can to streamline their legacy processes. They can now only create new efficiencies from adopting new technologies.
You have two options for doing so:
General purpose legacy software is not the answer. There are a wealth of new tools being purpose-built to solve the specific problems multi-family teams face — from underwriting, to property and asset management, to capital project planning.
To be clear — many of these are point tools that only address one individual issue and will be inappropriate for budget-conscious owners. Others are unproven AI tools that sound good on paper but disappoint in practice. Yet there are some consolidated platforms emerging that have been shown to work by the largest owners, under the most demanding of real-world circumstances.
Tailorbird is one such platform.
Tailorbird is an AI-driven platform built for multifamily owners, and designed to address the biggest challenges they face in today’s market.
Tailorbird automatically collects property data, generates 3D models, and provides accurate takeoffs. From there, Tailorbird generates detailed, accurate project scopes and streamlines the vendor bidding and negotiation process.
The result: Lowered soft costs, bids, and budgets, and the ability to scale without adding headcount across construction management and field work.
Tailorbird uses AI, big data, and streamlined workflows to reduce the time and effort it takes to map property, plan capital projects, and manage key aspects of the portfolio like repair/replace decisions on appliances and work order management.
The result: Get to projects 4-6 months faster, reduce Capex by 8%, and save $100+/unit/year on repair or replace decisions (without adding headcount).
Tailorbird automatically creates standardized property records. It collects 300,000+ data points at 98% accuracy for any property — fully-remote, in 3-5 days. It then attaches this data to 3D models, sitewalks, takeoffs, and more in one place.
The result: Property data is always available, it is consistent from property to property for easy apples-to-apples comparisons, and is fed directly into project planning.
Tailorbird’s property records include documents like PCAs, work orders, and catalogues of major appliances, systems, and equipment. These records also provide a complete history of capital work done on the property within the platform.
The result: Property-level data and historical information is attached to every record, creating a “time capsule” that persists even when management staff turns over.
Tailorbird was built to reduce Capex and Opex costs through streamlining capital projects and maintenance work, better managing appliances and equipment, and reducing utilities through implementing more efficient appliances.
The result: Capex and Opex reduction projects are performed faster and cheaper, leading to lowered costs and increased property value no matter how cap rates go.
Tailorbird is a platform that can replace multiple point tools and consolidate them into a single implementation. It also provides hard and soft ROI to multiple functions within the owner group, and accelerates business plans at multiple levels.
The result: Tailorbird is cost-effective to implement compared to combining point tools, and provides a cost that can be justified across multiple functions and budgets.
Finally, Tailorbird is not a general-purpose tool — it is a purpose-built AI-driven solution for multifamily that has been proven to work by some of the industry’s largest players, including Brookfield, Berkshire, Cortland, and AvalonBay.
The result: Our solution offers more than a buzzword, and can be adopted with confidence that it can deliver meaningful results against your biggest challenges.
It’s likely the challenges outlined in this piece will remain in play, and continue to create downstream impact, for at least the next 18 months.
That means the next year and a half will be a very challenging time for those multifamily owners who decide to simply “stick it out” and follow the status quo.
Yet the next 18 months will also be a time of great growth for those owners who choose to tackle these challenges head-on, innovate their core processes, and capture the opportunities that others are forced to ignore until the market improves.
Which will you choose?
To learn if Tailorbird can help you excel in today’s market, click here to schedule a free demo and consultation.
