May 1, 2026

Class A and Class C properties trade to start 2026 in Phoenix’s multifamily market

Q1 2026

Phoenix multifamily market overview

The pace of deliveries of new multifamily units slowed during the first quarter of 2026 in Greater Phoenix, giving some short-term relief to the supply-side pressures that have dragged on market performance in recent years. Projects totaling only about 1,800 units came online in the first quarter, a drop of nearly 45% compared to the same period in 2025. While the pace of deliveries has slowed from the peak, the competitive impact from new supply will continue to play a significant role in property operations throughout the remainder of this year. More than 26,000 units are currently under construction, nearly half of which are slated to come online before the end of 2026. Despite some continued challenges for operators, the market gained some momentum in the first few months of the year. Vacancies dropped to their lowest point in nearly two years, and rents inched higher from the year-end 2025 figure.

Multifamily investment activity in Phoenix during the first quarter was ahead of the pace established at the beginning of last year, even as capital markets conditions remain a key variable and interest rates influence pricing and sales volumes. The transaction mix shifted at the beginning of 2026. In recent years, activity has been heavily weighted towards Class A and newer Class B properties. During the first quarter, however, Class A and Class C properties dominated activity, with only a few Class B properties selling. This drove a wide disparity in pricing trends. Class A assets traded with a median price of $343,000 per unit, while Class C buildings sold for closer to $160,000 per unit. The result of this trading pattern was a median price of $226,700 per unit, even though very few properties traded near this price range. Cap rates diverged based on asset class as well. Class A cap rates averaged about 5.0%, while Class C cap rates generally ranged between 6.5% and 7.0%.

Looking ahead:

Multifamily property fundamentals showed signs of improving at the start of this year, although 2026 will likely be a year of stabilizing conditions across Greater Phoenix rather than an inflection point where the market truly changes its trajectory. The tightening vacancy and modest rent increases that occurred in the first quarter of this year are similar to trends that emerged during the same period in 2025. After gaining some ground at the beginning of last year, conditions softened throughout the remainder of 2025, a trend that is likely to repeat in the coming periods. While this year’s deliveries are expected to represent the market’s lowest annual total since 2022, oversupply conditions will persist, and vacancies are forecast to push higher in the coming quarters.

Year-to-date multifamily investment activity is ahead of the pace established at the beginning of 2025, and transactions are expected to continue to close through the remainder of this year. During the first quarter, sales were concentrated at both ends of the quality spectrum, with several transactions of $80 million or more involving newer Class A properties closing, as well as a handful of Class C sales below $20 million. The transaction mix will likely expand across more vintages, property classes and submarkets during the remainder of the year. To this point in 2026, the properties that have sold within the city of Phoenix have been located almost exclusively in the Midtown and Camelback submarkets; high-growth areas such as Desert Ridge and Deer Valley have historically been active locations for transaction volumes and should gain momentum.