The Phoenix multifamily market faces challenges as a surge in construction overshadows the rebounding rental demand, leading to weakened market conditions for consecutive years. The vacancy rate stands at its highest in over a decade at 10.8% as of early 2024, driven by an aggressive delivery schedule outpacing leasing activity. Despite positive net absorption of 9,600 units in the past 12 months, the imbalance between supply and demand has resulted in negative rent growth (-2.1%) and elevated concession usage. With 35,000 units currently underway, representing 9.3% of existing inventory, the construction pipeline’s full impact is expected to continue affecting the market in the coming quarters, especially in supply-heavy areas like Downtown Phoenix and Tempe.

Construction starts have eased in recent quarters, indicating a potential moderation in supply pressure by late 2025 or early 2026. Sales volume in 2023 experienced a significant decline (70%) compared to the surge in 2021 and 2022, attributed to higher borrowing costs and softer property performance. Despite these challenges, the Phoenix market remains a favorable investment destination, particularly in fast-growing west-side suburbs and areas like Goodyear, Buckeye, Surprise, and Glendale, where builders respond to population growth with new developments. Check out the rest of the highlights by clicking below!