Multifamily will remain a hot asset class for investors next year, despite peaking rents and oncoming supply in concentrated markets that will impact occupancy rates and drive up vacancies.

That's according to Colliers International's "Multifamily Spotlight" report released this month, which states apartment fundamentals and pricing—which have roughly doubled the CPPI National All-Property Index since Q3 2009—are expected to slow to more normal levels next year.

Colliers chief economist Andrew Nelson told Bisnow he still has a positive outlook for the sector as there are several social and economic factors that will continue to drive demand.

"Overall I still think that the situation for multifamily is still pretty favorable due to some unique long-term drivers," said Andrew (below). "We probably will not see much rent growth for a bit, but rents are at very healthy levels, so existing owners should do quite well. And with new supply rising, occupancy will decline a bit but to still healthy levels. There are still good years ahead even if we don't reach the same peak levels that we have in the past years."

One major factor is Millennials' preferences; they continue to favor renting over homeownership due to an array of factors, most notably the huge amount of debt the generation is carrying from college. That, and a large disparity in Millennial wages versus property values continues to bolster demand for multifamily.

The US population is expected to increase by almost 26 million people by 2025, according to the US Census Bureau. Millennials surpassed Baby Boomers last year as the largest living generation in the US, and Colliers says Generation Rent is expected to remain in the prime renting age for another decade.

In terms of oncoming supply, multifamily has recovered from the lows experienced during the financial crisis, as has supply for student housing, senior housing and single-family rentals. Colliers expects new supply to reach a cyclical high of 350,000 by the end of the year before leveling off.

One other factor is a lack of affordable housing in the country's major metros, which is forcing both businesses and residents to less expensive markets, resulting in migration to markets like Tampa, Orlando, Phoenix, Atlanta and Miami.

"I do think that rents are getting very high—too high— in many areas. It's starting to mean that too many people, even professionals, can't afford to live in many prime areas. For example, San Francisco firms are taking their jobs and moving to more affordable areas because the most important thing to them is access to workers," Andrew said. "Tech firms for example—they'll pay the rent they need to to attract workers, but if their workers can't afford to live in the area, then the firms are going to move to areas where workers can afford to live."