Rent Concessions and the Effective-Rent Gap

Multifamily Dive ran a piece last week on a question that sounds simple: are rent concessions rising or falling? The answer depends entirely on which number you look at. REIT executives reported free-rent incentives easing on their first-quarter calls, while CoStar, RealPage, and Yardi all show concession usage broadening across 2026. Per Colliers, concession dollars hit a record high in Q1 at an average of $129 per unit, yet only 25.4% of units are offering any incentive at all – well below the 64.2% peak of late 2009.

The aggregate concession rate is the wrong number to anchor on. What matters for underwriting is where the discounts are concentrated, and the distribution is lopsided. Per RealPage, class C units carried an average 23.4% discount in April versus 13.2% for class A and 14.5% for class B. REIT portfolios skew toward newer, higher-quality product in their stronger markets, which is why their concession reads are softening even as the broader figure climbs. The national average obscures two very different markets sitting inside it.

For Sunbelt operators, this is the cost that does not show up on the asking-rent line. Concessions are up year-over-year in 44 of the 50 largest metros, and the heaviest discounting sits in the supply-pressured growth markets (i.e. Denver at 68% of listings, Charlotte at 67%, Dallas and Austin at 64%, and Nashville at 63%, per Zillow). In Phoenix, per Continental's Jay Lybik, properties built since 2023 totaling roughly 30,000 units are currently advertising ten weeks free. A deal underwritten to face rents in any of those markets is carrying six to ten weeks of give-back the headline rent never reflects.

That gap is where this cycle's stress is accruing. Per Colliers, multifamily distress this round is emerging less from occupancy erosion and more from the combination of elevated concessions, muted effective-rent growth, and refinancing pressure on assets underwritten to aggressive post-2021 expectations. Concessions represent 7.2% of asking rent today versus 9.2% at the financial-crisis peak, so the pressure is real but not yet systemic. For anyone underwriting Sunbelt acquisitions or takeouts over the next several quarters, the asking rent is the wrong starting point – the effective rent, net of a concession load that runs into 2027 in the highest-supply markets, is what the deal actually has to clear.

Source: Multifamily Dive

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