If you’ve watched the Sun Belt cool while the Midwest keeps humming, you’re not imagining it. The region’s apartment markets entered late-2025 with steadier pricing, healthier occupancy, and—critically—a much lighter new-supply burden than most U.S. peers. At Ellsbury Group, we’ve seen firsthand how investor confidence and disciplined development have kept Midwest fundamentals resilient, offering a rare blend of stability and upside in an otherwise uneven national market. Here’s a practical, investor-oriented read on what’s driving valuations, cap rates, and near-term risk/reward across the Midwest.
The short version
Supply is normalizing fast. New deliveries in Q3 2025 were the lowest relative to history in the Midwest—below the region’s own decade average—relieving pressure on rents and occupancy.
Cap rates are largely stable. Mid-2025 surveys and investor polls point to steadiness through year-end, with select compression possible where supply is scarce and rent rolls are diversified.
Pricing bifurcation favors “steady-eddies.” Chicago and Columbus have led rent prints at times in 2025, while second-tier metros with limited construction (e.g., Kansas City, Milwaukee, parts of Indiana and Ohio) show resilient demand and firming pricing.
Pricing & cap rates: Where deals are clearing
Transaction velocity is still lighter than pre-2022, but guidance from major broker surveys shows going-in apartment cap rates holding broadly steady in 2025, with expectations for modest volume improvement and little net movement in exit cap assumptions. In practice, the Midwest continues to price at a discount to coastal gateways but at a premium to risk given shallow supply pipelines and stable payrolls.
What that means for pricing:
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Class B/C suburban assets with durable collections and low turnover are commanding tighter spreads than in 2023–24 as buyers underwrite less downside to NOI.
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Value-add trades are back where rent-to-income headroom and renovation scope are clear (e.g., 1980s–2000s stock in Ohio and Indiana), while heavy-lift deals still price with a wider risk premium.
Supply is the swing factor (and the Midwest has the edge)
The national development wave is ebbing, but it was never as extreme in the Midwest. Only ~12,100 units delivered in Q3 2025 region-wide, the sole U.S. region below its 10-year average that quarter. With fewer lease-ups to absorb, vacancy pressure is milder and operators can lean less on concessions—supporting both rent levels and asset pricing.
Big picture, national forecasters expect construction starts to remain well below peak into 2026, setting up above-trend rent growth as the pipeline clears—a tailwind that disproportionately benefits low-supply regions like the Midwest.
Rent and demand pulse: 2025 snapshots
Columbus: One of 2025’s quiet outperformers. Advertised asking rents climbed 0.6% on a trailing three-month basis heading into fall, outpacing the national figure, while Q3 demand topped the region. Pricing for stabilized, infill suburban assets has firmed accordingly.
Chicago (metro): A national rent-growth leader mid-year, with institutional capital selectively re-risking around transit-served submarkets and high-barrier suburbs.
Kansas City / Indianapolis / Milwaukee: Demand was steady, with Milwaukee earning headlines for high occupancy and strong renewal rates, and Kansas City showing solid Q3 absorption. These dynamics support tighter pricing especially on Class B portfolios with light capex.
National context: By early fall, U.S. advertised rents were roughly flat to slightly up YoY, but the Midwestern mix of limited supply + sticky occupancy continued to compare favorably.
Investor behavior: Follow the operating math
Capital is tilting toward cash-flow reliability over beta. Deal committees are rewarding:
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Low exposure to lease-up competition within a 3–5 mile trade area,
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Renewal capture (above-average retention, modest trade-out), and
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Expense discipline (utilities optimization, insurance programs, and tax protests baked into underwriting).
Industry polling and midyear outlooks reinforce the view that stable cap rates plus improving absorption set the stage for more trades as bid-ask spreads narrow—particularly in Midwest metros where rent rolls look predictable into 2026.
Pricing playbook for the next 12 months
If you’re buying:
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Prioritize submarkets with <1 year of visible pipeline and below-average Q3/Q4 deliveries; those are the first to see concession burn-off and rent re-acceleration, which supports today’s price per unit.
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Lean into renovation spreads where rent-to-income is conservative; Columbus, Indy suburbs, and many Ohio secondary markets still pencil for programmatic value-add without assuming aggressive trade-outs.
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Don’t over-penalize exit caps in submarkets with proven renewal rates and thin pipelines; survey data suggests exits are likely flat through 2025 barring rate shocks.
If you’re selling:
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Bring a clean, defensible T12 and highlight renewal capture/concession trends. Markets like Milwaukee and Chicago suburbs are drawing outsized attention for occupancy durability—use that to anchor pricing guidance.
If you’re holding/financing:
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Watch for supply-driven rent firmness to show up in Q1–Q2 2026 budgets as lease-ups fade; several national outlooks flag a constructive setup for rent growth into 2026, which improves refi math.
Why the Midwest keeps winning on a risk-adjusted basis
Even with some national cooling, investor and operator surveys, midyear outlooks, and metro-level data all point to a region defined by right-sized supply and steady demand. That combination is translating into firmer pricing, stable cap rates, and higher conviction underwriting compared to many high-delivery Sun Belt markets.
At Ellsbury Group, we help investors and property owners navigate these shifts with market intelligence and transaction insight tailored to the Midwest’s evolving multifamily landscape.
Connect with our team to discuss your 2026 investment strategy or upcoming acquisition opportunities.
Sources:
CBRE 2025 Outlook & Midyear Review; CBRE U.S. Cap Rate Survey H1-2025; Marcus & Millichap 2025 Multifamily National Investment Forecast; Yardi Matrix (national and Columbus 2025 updates); RealPage Q3-2025 supply and Midwest demand analyses; Berkadia investor surveys; selected market coverage.
