December 30, 2025

Vacancy rises in Richmond as new multifamily supply continues to deliver

Q3 2025

Richmond’s multifamily market is adjusting to new supply during a period where demand drivers remain strong. During the third quarter, vacancy rose to a 10-year high of 7.4%, up 50 basis points from the midyear figure. Operators are competing for renters through competitive rent adjustments and targeted concessions. Average rents fell 0.4% from the prior quarter, but have advanced by 1.7% year over year, reaching $1,625 per month. Year to date, 3,442 units have been delivered, particularly in Downtown Richmond, and submarkets in Chesterfield County. With new supply expected to taper in 2026, the current imbalance is expected to normalize over the medium term.

Sales activity has remained relatively steady, averaging slightly below the 10-year average. Multifamily sales in the market tend to be seasonal, with historical data of the past 10 years showing nearly half of annual transactions occurring in the fourth quarter. The investment market is being impacted by headwinds including price discovery, tighter underwriting, and higher capital costs. Asset classes trading in Richmond are largely diverse, with a modest skew toward institutional quality deals in core submarkets. On average, investors are transacting at higher cap rates than 2021–2022 levels, with most Class A trades falling in the 5.25% to 5.75% range. While some buyers and sellers have adjusted price expectations, many remain on the sidelines awaiting improved financing conditions. Despite these challenges, investor interest in Richmond remains strong, supported by a favorable long-term outlook.

Looking ahead

Richmond’s multifamily fundamentals are expected to stabilize in 2026. Vacancy is projected to peak at 7.5% in late 2025 before potentially leveling off in early 2026. Rent growth should remain positive but moderate as supply pressure keeps operators competitive in attracting new tenants. Key demand drivers, including steady population in-migration, expanding employment, and relative affordability compared with Northern Virginia, position Richmond for strong long-term market conditions. Concessions are expected to remain elevated over the next few quarters but could taper if lease-up velocity increases or supply growth slows.

Investment activity is expected to strengthen gradually as interest rate uncertainty moderates and pricing clarity improves. Richmond remains an attractive market for investors due to its strong fundamentals, including economic consistency, a growing renter base, and lower pricing volatility. As fundamentals stabilize and financing conditions improve, transaction volume is likely to increase in 2026. Early signs of renewed activity may first appear in value-add acquisitions, followed by stabilized Class A trades as rent growth accelerates.