February 9, 2026

Transactions in Phoenix pick up across multifamily property classes to close 2025

Q4 2025

Phoenix multifamily market overview

After outperforming consensus expectations for much of 2025, the Phoenix multifamily market cooled during the fourth quarter. Vacancies inched higher and rents declined, moves that have occurred at the end of each year since 2022. Despite pushing higher at the end of the year, area vacancy ended 2025 at just 7.5%, about 50 basis points lower than earlier forecasts. The rate has remained within a fairly tight range for the past several periods, averaging 7.2% since the second half of 2023. Deliveries have been elevated, but recent levels are 20% below the 2024 peak. While the pace of new development slowed in 2025, renter demand for units remained elevated. Net absorption totaled more than 21,000 units during the course of the past 12 months, outpacing 2023 and 2024 levels. Despite mostly stable vacancy conditions at stabilized properties, the persistent competition coming from new deliveries has resulted in lower rents and continued use of concessions to attract and retain renters.

The multifamily investment market gained momentum in 2025, with more properties changing hands and a broader mix of classes and vintages making up the inventory of properties that sold. That momentum was evident in the fourth quarter, which marked the highest three-month period of transaction volume across Greater Phoenix since the end of 2022. While newer properties accounted for a smaller share of transaction activity throughout much of the year, approximately 40% of the transactions that closed in the fourth quarter involved properties that had been delivered since 2020. The sales of these newer properties commanded a median price of $303,600 per unit during the quarter. While an elevated pace of deliveries continued to drive sales of newer assets, investors showed renewed interest in Class B and Class C buildings. The number of Class B properties that sold in 2025 was up nearly 70% from the prior year, while Class C trades were up more than 50%.

Looking ahead

The Greater Phoenix multifamily market has been in a period of elevated construction for the past few years, which has created a more competitive leasing environment for operators. Supply-demand conditions are expected to move closer to equilibrium in 2026, supported by a thinning development pipeline. At the end of 2025, fewer than 25,000 units were under construction, the market’s lowest total in more than four years. A slowing pace of construction starts will be a driver of easing supply-side pressures. Multifamily developers broke ground on only about 8,500 rental units in 2025, down nearly 50% from the prior year and the lowest figure in the region in nearly a decade. After slowing by about 20% in 2025, completions are forecast to decline by an additional 25% in the coming year, reaching just 15,000 units; net absorption has averaged more than 16,000 units per year since 2023.

Investors increased their activity levels in 2025, particularly in the fourth quarter, setting the stage for a continued rebound in sales velocity in the coming periods. Increasing transaction volumes in 2025 were propelled primarily by a broadening out of the classes and vintages that were being acquired. Prior to 2025, investors had largely focused on newer construction properties, limiting demand for Class B and Class C properties. Some of this reduced demand was fueled by an expectation that older properties purchased in the last cycle would be made available at deeply discounted valuations in distress sales. To this point, lenders have shown a willingness to work with existing owners, choosing not to force sales as loans have approached maturity. As such, the number of distressed transactions has been minimal, and investors are beginning to resume traditional acquisitions of properties built in the 1990s or earlier.