In early 2024, the Phoenix multifamily market began showing signs of recovery, as easing inflation and rising consumer confidence boosted renter household formation. While new supply still exceeds leasing activity, occupancy and rent declines have started to stabilize. Over the past 12 months, the Valley absorbed 15,000 units, doubling the pre-COVID five-year average. This absorption was led by new luxury complexes and a significant improvement in mid-priced 3-star properties, helping to stabilize the metro-wide vacancy rate at 11.0%.
Despite the signs of stabilization, construction remains high, with 20,000 new units completed in the past year and 33,000 more under construction. Phoenix is now the sixth most aggressively built apartment market in the U.S., which may lead to rising vacancies, especially in high-growth areas like Downtown Phoenix, Tempe, and the South West Valley. Workforce housing has been more resilient, with vacancies and rents relatively stable. However, luxury properties have seen vacancies rise by 500 basis points and rents decline by 4%. The market continues to experience negative annual rent growth since Q4 2022, with increased concessions.
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