In Q1 2024, the Phoenix multifamily market showed signs of recovery, driven by reduced inflation and increased consumer confidence, boosting renter household formation and tenant demand. Despite continued growth in new housing developments, there was a stabilization in occupancy and rental rates, suggesting the market might be approaching its lowest performance level yet. Notably, the absorption of 12,000 units over the past year exceeded pre-COVID averages, reducing the metro-wide vacancy rate to 10.6% for the first time since mid-2021, particularly among 3-star properties.
However, Phoenix’s ongoing construction boom presents challenges, with 18,000 new units completed and 33,000 under construction, making it one of the top cities for aggressive apartment development. High-growth areas like Downtown Phoenix, Tempe, and the West Valley continue to face oversupply issues impacting the market. Luxury developments in Downtown Phoenix and Tempe, like AVE Phoenix Sky with rents starting at $2,300/month, contrast with significant growth in affordable western suburbs like Goodyear and Surprise. Economic projections suggest a potential slowdown in construction by late 2025.
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