February 12, 2019

Phoenix Q4 Market Report: Rent Growth, Employment Gains Fueling Phoenix Apartment Market

Highlights

The Greater Phoenix multifamily market closed 2018 on a high note, with vacancy remaining low and rents posting significant increases. Renter demand remains strong enough to keep vacancy tight even as new units are delivered.
Vacancy was 5.7 percent at the end of the fourth quarter, matching the rate from the third quarter. The rate declined by 10 basis points in 2018, following a 20-basis-point improvement in 2017.
Greater Phoenix continues to record some of the strongest rent increases in the country. In 2018, asking rents spiked 8.9 percent, reaching $1,074 per month. Rents rose 1.7 percent during the fourth quarter, a typically slow period for rent growth.
Apartment construction slowed during the fourth quarter, and deliveries in 2018 lagged levels from 2017. Projects totaling more than 11,000 units are currently under way, and deliveries will likely pick up in 2019.
Sales of apartment properties slowed a bit in the fourth quarter, but transaction velocity in 2018 was nearly identical to 2017 levels. Sale prices pushed higher, with the median price reaching $120,000 per unit. Cap rates compressed in 2018, averaging 5.2 percent for the year and 5 percent in the fourth quarter.