Lease Concessions Recede for Class A Properties
One question raised in the 2026 preview edition of the ALN newsletter was whether absorption momentum could be maintained as lease concessions begin to decline, allowing occupancy to continue recovering this year. With peak leasing season just beginning, it is still too early to say. However, recent multifamily performance offers some early clues.
Data refers to conventional properties of at least 50 units.
Big Picture Context
After surging in 2021, apartment demand dropped sharply in 2022, with net absorption falling to its lowest level of the past decade. When demand began recovering in 2023, the top price tiers led the rebound. The recovery did not reach Class C properties until 2024, and Class D did not see meaningful positive absorption until 2025.
A similar pattern across price tiers would not be surprising as the industry tests whether absorption can remain strong without the heavy reliance on lease discounts seen in recent years. Recent industry data suggests that dynamic may already be emerging.
First, a brief note on occupancy. Despite year-over-year improvements in national absorption in 2023, 2024, and 2025, average occupancy did not begin rising until 2025. This was due to the elevated new supply in the period. Realized demand was improving, but not enough to offset the inflow of new units.
This year, new supply is expected to decline for a second consecutive year after a peak in 2024. With fewer deliveries, annual net absorption could decline this year and still allow occupancy to tighten further.
National new supply is currently expected to come in at around 410,000 units this year. That provides a high, but not entirely unrealistic, bar for net absorption to surpass to continue a national average occupancy turnaround for a second year.
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Top Price Tiers Offer a Clue
Apartment demand was surprisingly robust last year with net absorption surpassing even the 2021 total. As mentioned, some of this absorption was boosted by unusually widespread lease concessions. Availability entered 2026 higher than the pandemic-era peak. While concession values have remained closer to prior peaks, the defining feature of this cycle has been how widespread discounts became, making availability the more relevant measure of market reliance. However, concession availability may have already crested at the top of the market.
Discount availability declined by 24% for Class A properties over the last twelve months and by 4% for the Class B subset. Both price tiers have seen declines over the last six months and the last three months as well.
To the contrary, discount availability remains on the rise in the workforce housing segments. Class C availability has increased by 13% over the last year and Class D has seen a 38% increase. Both market segments have seen a rise over the three and six-month horizons as well. Class D stands out, with discount availability rising 17% in just the last three months – the largest increase for this time of year in the past three years.
Net absorption generally remained resilient in the winter period, but Class A properties managed it while also significantly reducing reliance on discounts. Just as back in 2022, when Class A was the first to turn a corner in net absorption and was followed most closely by Class B. The winnowing of concession availability for Class B has been more modest, but the trend is intact across the three, six, and twelve-month time horizons.
Takeaways
A major question entering 2026 was whether leasing momentum could continue if the industry reduces its reliance on lease concessions. Discounts have proliferated in recent years and have been a major headwind to effective rent growth.
It is still early, but the price class data presents a possible clue. The top of the market – less price sensitive and still competing with a frozen single-family housing market – has seen healthy net absorption and a sizable decline in concession availability. This does not necessarily mean that the trend will spread into the Class C and Class D segments, but it is an encouraging sign that at least some portion of the industry may be able to wind down lease concessions from their unusual level.
For the lower price tiers, the turnaround may take longer to materialize. For the net absorption recovery, Class C followed a year behind the top two tiers, and Class D took another year after that. Even so, strong demand with widespread concessions is far preferable to weak demand with widespread concessions.
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