The Phoenix multifamily market continued to face headwinds in Q1 2025, with vacancy climbing to 11.9% amid ongoing supply pressure. Despite healthy leasing activity and 18,000 units of net absorption—well above the pre-COVID average—construction remains elevated, with 25,000 units delivered in the past year and another 23,000 underway. Most new development has centered on luxury products, contributing to elevated vacancy and falling rents in that segment. Asking rents declined 2.5% year-over-year, with concessions now common across the metro.
Investors and owners are navigating a market in transition. While demand remains steady, excess inventory is pushing rent growth into negative territory. Average price per unit fell 4.1% year-over-year to $267,000, and cap rates rose slightly to 4.9%. Submarkets like Tempe, the Southwest Valley, and Southeast Valley recorded some of the highest vacancy and rent declines, while workforce housing remained somewhat more stable. With construction starts slowing, market conditions are expected to gradually stabilize by 2026, offering opportunity for investors focused on long-term positioning and value-add strategies.
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