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Market Overview
Thus far, Phoenix’s multifamily market has proven to be resilient in the face of the pandemic, thanks to impressive market fundamentals. The stay-at-home orders in Q2 2020 resulted in pent-up demand and positive net absorption in Q3 2020 and Q4 2020. Although there is no definitive end date to the global health crisis, Phoenix will rebound reasonably quickly with supporting demand drivers, such as affordable cost-of-living, expanding job market, and attractive cost of doing business. The robust population growth, paired with the relatively low levels of single-family housing development, has further fed into apartment demand. The market’s tight vacancy rate has contributed to the ample rent growth that has landed Phoenix among the top five metros in the last two years.
What does this mean for Investors?
Phoenix has seen heightened new supply as 9,100 units have delivered in the last two years, and developers plan to continue this momentum. Currently, there are over 18,000 units underway, which is expected to grow inventory by 5.4 percent. Downtown Phoenix leads in new developments with 4,400 units underway, as part of the submarket’s revitalization plans. In addition to downtown’s explosive growth, Southeast Valley submarkets also see heightened new supply levels as developers try to capitalize on affluent renters and employment growth. The majority of new supply consists of 4 & 5 Star units with high rents as developers combat rising land costs, entitling property, and construction.
