Phoenix Multifamily Market Sizzles

The Phoenix multifamily market remains one of the hottest in the nation, propelled by strong in-migration during the pandemic and job growth as well as a diverse economy.

“The inbound migration versus outbound is the best in the nation, and it’s attracting both Gen Z and millennials as well as baby boomers,” says Doug Ressler, manager of business intelligence at Yardi Matrix.

Phoenix continues to see year-over-year double-digit rent growth, up 25.9% in November over the same period in 2020, according to Yardi Matrix. The market’s net absorption also has reached record highs and outpaced supply, with occupancy rates over 96% in the fourth quarter.

“Rent growth is still not making it an unaffordable market,” says Zonda managing principal Kimberly Byrum. “It’s strong, but it’s not Seattle and Los Angeles rent numbers. It’s much more affordable than the coastal markets.”

The sprawling metro, which spans 80 miles from east to west, also boasts a business-friendly climate and land availability—good news for the multifamily industry. Taiwan Semiconductor Manufacturing Co. has started construction on its multibillion dollar chip plant, with plans to build several more factories over the next three years. KORE Power has plans for a 1 million-square-foot battery manufacturing facility, slated to be completed in 2023 and create more than 3,000 jobs.

In addition, the market has been a hotbed of investment activity. According to Yardi Matrix, it was the second-strongest metro for multifamily investment during the first half of 2021.

“The downside is it’s not a secret anymore so there are no deals to be had,” adds Byrum. “It’s competitive if you’re buying.”

Ressler says another looming issue for the market is escalating construction costs. From the first to second quarters of 2021, Phoenix led the nation with a 4.29% increase in costs.

“Not just in Phoenix, the cost of steel and lumber, the availability of labor, and the supply chain are really creating havoc across the country,” says Ressler. “However, the one thing Phoenix has going for it is the workforce is here, the supply chain will get itself righted in the course of 2022, and we believe costs will begin to dampen.”

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