Bozeman’s multifamily market has entered a new chapter—one that many of us saw coming.
After years of breakneck construction, surging demand, and double-digit rent growth, the local market is now experiencing its natural correction. Vacancy is rising. But despite more availability, rents have continued to edge upward, with the average hitting $2,166.
At a glance, this trend might appear contradictory. Rising vacancies should bring down rents. But in Bozeman’s case, the numbers tell a more nuanced story.
Not All Vacancy Is Equal
The increase in available units isn’t affecting the entire market evenly. The data shows a sharp divide between older units and the post-2020 construction boom. Apartments built before 2020 have a healthy vacancy rate of 4.3%. In contrast, units built in the last few years are seeing a vacancy rate of 21.8%.
That split is telling.
Many of the newest developments are still in lease-up phases which elevates the vacancy rate. They are facing headwinds from high asking rents. Developers, constrained by construction and financing costs, must hit certain rent thresholds to make their projects pencil. But renters—facing inflationary pressure in all other aspects of life—are becoming more selective. Price sensitivity is real, and new construction premiums are no longer easily justified by amenities alone.
Incentives Fill the Gaps—But Temporarily
To bridge the rent gap, landlords of newer assets are offering concessions—most commonly, one or more months of free rent. While these incentives don’t show up in average asking rent data, they significantly affect a building’s effective rent and net operating income.
This tactic may fill units in the short term, but it does not address the core challenge: a mismatch between what the market can bear and what new developments require financially.
Construction Continues, But Momentum Slows
As of Q1 2025, more than 1,000 new market-rate units are under construction, with an additional 221 in permitting. That’s on par with 2024 delivery levels, despite a clear drop in absorption. The most recent quarter saw a noticeable decline in leasing velocity, signaling reduced demand for new units.
Absorption falling while construction holds steady is a signal that supply is outpacing demand. In turn, developers appear to be responding. New permitting activity is beginning to slow, an early indication that the pipeline may start to narrow.
This isn’t the end of growth—but it is a moment of recalibration.
The Role of Affordable Units
Even with more units sitting vacant, affordability remains a top concern in Bozeman. There are 371 affordable units in the pipeline—a modest but meaningful response to workforce housing needs.
Here’s the disconnect: while market-rate units sit empty, many workers still can’t afford them. The average rent of $2,166 may reflect Bozeman’s changing demographics, but it doesn’t align with the earning capacity of the average service worker, teacher, or healthcare tech. That means older, lower-rent units remain in high demand—and are often fully leased.
The challenge is not just about building more—it’s about building what the community can support long term.
The Path Forward
So, what should owners, investors, and developers be doing right now?
First, understand your property’s positioning. For stabilized assets built before 2020, the current market presents an opportunity. These buildings are outperforming newer peers in terms of occupancy and operational consistency. Cap rates have shifted, yes, but cash flow from older properties is holding steady—especially where expenses are well-managed.
Second, for those entering or expanding in this market, timing and product type matter more than ever. The days of “build it and they will come” are over. Success now hinges on location, pricing, and strategic lease-up approaches.
And third, incentives should be viewed as a bridge—not a solution. They help landlords compete temporarily, but reliance on concessions is not a sustainable long-term leasing strategy.
A Market That’s Maturing
Bozeman isn’t cooling off—it’s maturing.
The high-growth phase brought thousands of new units to the market and pushed rents to historic highs. But that growth was always going to plateau. What we’re seeing now is the natural result of oversupply meeting price resistance.
This evolution was predictable—and for those of us closely watching job growth, unit deliveries, and leasing performance over the past few years, it was only a matter of when, not if.
The most successful stakeholders will be the ones who navigate this phase with clarity—not just gut feel. That means making decisions rooted in market intelligence and real-time performance data, not assumptions or outdated benchmarks.
SterlingCRE Advisors works every day to make sure our clients have access to the insights they need to move confidently. In a more competitive market, sound data isn’t just helpful—it’s essential.
