Welcome back to What's Hot & What's Not CRE — your daily pulse on commercial real estate in America. It's Thursday, January 22nd, 2026. Today we're breaking down multifamily by class — A, B, and C — and picking a clear winner for 2026. 🔥 What's Hot — Class B Workforce Housing Takes the Crown: Class B Outperforming Class A — Class B multifamily is outperforming luxury assets in rent growth and expected to continue through 2026; this is the institutional consensus trade Price Gap Advantage — The price difference between workforce housing and luxury units averages $501-$685 per month in major metros; that affordability advantage is durable demand High Retention Rates — Lower and mid-priced properties seeing high retention rates; tenants priced out of homeownership are staying put; demand among middle-income households is less sensitive to rent increases Institutional Capital Returning — Value-add strategies are back; institutional investors recognizing the value in workforce housing repositioning plays Regional Winners — Northeast and Midwest Class B properties seeing modest rent growth while avoiding oversupply; low-supply markets outperforming Structural Affordability Crisis — Middle-income renters need Class B; this is not cyclical, it's demographic ❄️ What's Not — Class A in Oversupplied Sun Belt Markets: South Region Vacancy at 9.0% — Compared to Midwest at 6.6% and Northeast at 5.2%; the Sun Belt boom overshot demand Urban Core Pressure — Vacancy in principal cities rose to 7.6%, ahead of suburbs at 6.7%; new Class A supply is squeezing urban operators Heavy Concession Markets — Austin, San Antonio, Dallas, Denver, Nashville, Las Vegas all offering heavy concessions; Texas dominates the concession list Extended Absorption Timeline — Austin and Phoenix may take until late 2026 or longer to work through supply glut; Dallas, Houston, Nashville, South Florida expected to ease in second half of 2026 Class A in oversupplied markets = compressed NOI, extended lease-up timelines, and capital calls Class C — Mixed Picture — Demand remains stable from lower-income households less sensitive to rent increases; but limited capital access for improvements and higher expense pressure; not the worst, not the best 📊 Why It Matters: The multifamily market is bifurcated. National averages are misleading. Class B workforce housing in supply-constrained markets offers rent growth durability, stable tenant demand, and institutional capital access. Class A in oversupplied Sun Belt metros is facing a prolonged absorption cycle. Asset selection and market selection are everything in 2026. 💡 Investor Takeaway: Class B workforce housing is the strongest play for 2026 — durable demand, high retention rates, affordability advantage, and institutional backing. Avoid Class A in Austin, Phoenix, Dallas, Nashville until concessions ease. Class C works if you have operational expertise. Pick your class, pick your market, and underwrite conservatively. Thanks for tuning in. See you tomorrow! Don't forget to Like, Share and Subscribe! Visit hotnotcre.com to learn more and subscribe to our newsletter.