Multifamily Investor Demand Returns for Class A Properties in Hampton Roads

Rents in Hampton Roads trended higher during the opening months of 2025, reflecting the region’s strong renter demand for units. While development slowed in recent months, the market is still working through elevated delivery levels from 2024. Completions were elevated last year, but net absorption of more than 3,150 units nearly kept pace with deliveries. Although recent inventory growth has been elevated, property performance remains stable with vacancy remaining between 5% and 6% since the third quarter of 2022. These conditions have allowed for continued rent growth. Areas such as Chesapeake and Norfolk performed well recently, posting year-over-year rent gains of 3.7% and 2.9% respectively, while vacancy in both cities increased by 40 basis points.

Sales activity in the Hampton Roads multifamily market returned closer to long-term trends in the first quarter. Total sales over the past three months closely tracked the region’s first-quarter average from 2016 to 2021, prior to the surge in activity that occurred in early 2022 and 2023. So far this year, multifamily trades have been spread across the region. Over the past 12 months, however, Newport News has accounted for the largest share of sales at 33%, followed by Norfolk at roughly 20% of the total transaction counts. Pricing has risen considerably since last year; the increase is primarily driven by the concentration of top-tier assets trading in 2025. Class A properties have accounted for nearly all sales this year, a notable shift from their 12% share of transactions between 2016 and 2024.

Looking ahead

Market fundamentals in Hampton Roads are expected to continue improving in 2025 as the pace of new deliveries should retreat significantly from the elevated levels of 2024. In 2024, 3,450 units came online, the highest annual total on record. This trend is set to reverse in 2025, with only 550 units scheduled for delivery, marking the lowest level since 2001. Easing supply-side pressures should be a longer-term trend as well, due to a cooling construction starts and limited permitting activity. Absorption should begin to outpace the number of completions as the construction pipeline contracts. In the near term, vacancy is likely to hold steady between 5.5% and 6%, reflecting a healthy range despite varying market conditions and some economic headwinds.

Investment activity for area multifamily properties should regain momentum in 2025, with transaction volume projected to surpass the 2024 total and return closer to normal levels. Sales velocity in Class A properties may continue to fuel the market, but investors are also expected to seek to acquire middle-tier and especially lower-tier assets, as Class C properties have accounted for roughly 55% of the region’s transaction mix since 2016. Property fundamentals in Norfolk remain strong, with the largest share of units delivered in the past year located within the city limits. As development activity cools and vacancy tightens, trade volume may return to more typical levels in 2026 and 2027, a trend that would be supported by an eventual decline in interest rates.

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