Phoenix Multifamily Weathers Second Quarter Under the Umbrella of Federal Stimulus and Renter Protections

The Phoenix multifamily market recorded positive demand in the second quarter and fared pretty well considering the turmoil caused by the coronavirus. That performance, though, is buoyed by significant federal and state stimulus that has helped thousands of Phoenicians pay rent.

Asking rents have recovered in some submarkets following a reduction from March to late April. Marketwide, rents fell about 2% during that time, but have stabilized and started to rise again. The West and East Valley submarkets have more than recovered from the dip, but rents have a long way to improve in the most expensive submarkets in Phoenix, including North Scottsdale, Camelback and Old Town Scottsdale.

While asking rents have started to rise, so has the use of concessions, especially for new apartment communities. About 25% of all apartment communities offered some concession in June, compared to about 60% of newer properties that offered move-in incentives.

The near-term outlook is less optimistic, due to record levels of coronavirus cases and the upcoming expiration on the $600 per week in unemployment insurance at the end of July. On top of that, Arizona’s postponement of eviction actions will soon end. Landlords will also need to brace for a wave of new supply. Developers are making progress on a hefty construction pipeline that consists of 16,000 units that are mostly limited to top-tier apartments. Downtown Phoenix has the most inventory underway, with almost 4,000 units that account for nearly 12% of the submarket’s stock. Submarket’s in the East Valley, including Gilbert and Tempe, will also receive a significant boost to inventory over the next several quarters.

Sales volume tumbled since March, following a record level of activity in previous quarters. Deals are still getting done, especially as investors rush to meet 1031 exchange deadlines.