We’re now seeing the first meaningful rent softness since 2009. November posted just +0.7% year-over-year rent growth, which sounds positive… until you adjust for costs.
CPI (Oct): 2.6% → Real Rent Growth: –1.9%
And that modest increase was carried almost entirely by Midwestern markets: Kansas City +4.1%, Chicago +3.6%, and a few others propping up the national average.
Does that mean the Sun Belt is declining?
Pretty much. Strip out the Midwest and Northeast, and the national number flips negative. Across the Sun Belt, rent declines are widespread:
- Austin –5.9%
- Phoenix –2.9%
- Atlanta –2.9%
- Raleigh –3.1%
Developers have delivered ~550,000 new units in 2024–25, but absorption is just ~370,000. Some Austin submarkets are sitting at 85% occupancy, a first in years.
So what does +0.7% really mean? Rents are:
- Below inflation
- Below historical rent-growth averages
- Below replacement-cost rent growth
- Below what owners need to maintain NOI after surging insurance, taxes, labor, and maintenanceIn other words: Rents are “up,” but real income is down.
Why Cap Rates Are Misunderstood
This is one of the biggest reasons I think cap rates are one of the most misinterpreted metrics in commercial real estate.
People love to say, “It’s a 7 cap,” as if that number tells the whole story. It doesn’t.
A cap rate is only as real as the NOI and market strength behind it.
If expenses are understated, insurance isn’t normalized, property taxes reset, or rents aren’t sustainable, that “7 cap” turns into a 5 cap (or worse) in no time.
A cap rate without context is meaningless
What’s your take?Are cap rates still a reliable metric… or just a lagging indicator of who’s underwriting wishful thinking? Do you see rents bouncing back?
In Nashville, the situation is even more pronounced: median rents fell 0.9% month-over-month in October 2025 and are down 1.6% YoY, per Apartment List's November report. This places Nashville's nominal growth well below the national figure and far from historical averages. Smaller markets like Memphis, Chattanooga, and Knoxville held up slightly better, but still turned negative after adjusting for inflation.
Why This Matters to You
Whether you’re holding, selling, or repositioning a multifamily, industrial, or other commercial assets, today’s landscape looks very different. Falling rates no longer guarantee rising values. The winners will be those who understand local demand drivers, track real job growth, and adapt to shifting real estate uses, while positioning their property to stand out to out-of-state buyers.
Always happy to talk if you’d like to discuss what these shifts mean for you.
