Phoenix’s Strong Tailwind For Multifamily Growth

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The Editors's picture

Multifamily growth is strong as Phoenix is reinventing itself as a tech hub driven by a diverse economy, welcoming young professionals and investors looking for higher yields in secondary markets, according to a new report from Yardi Matrix.

Phoenix rents rose 3.2 percent in 2017, outpacing the 2.5 percent national growth rate. The average rate across the metro reached $1,020, below the $1,359 national average.

These and other highlights are summarized in Yardi Matrix’s new report, “Phoenix’s Strong Tailwind,” a microeconomic analysis of the city’s multifamily market.

The total transaction volume in 2017 was nearly $4.5 billion, almost on par with the 2016 cycle peak.

Education and health services led employment gains with 10,100 jobs added in the 12 months ending in October 2017. The technology sector is quickly catching up.

Statistics from the Arizona Office of Economic Opportunity Employment show that the professional/scientific/technical services subcategory jumped 4.8 percent for the same period.

 Phoenix ranked third among the country’s hottest cities for tech jobs in 2017, according to Money magazine, with several companies relocating or expanding in the metro. Intel announced a $7 billion expansion (originally announced in 2011 then delayed) slated to bring 3,000 new jobs to Phoenix. The metro’s industrial market is also performing well: Last year, Phoenix achieved its largest-ever annual net absorption gain, reaching 9.8 million square feet.

Multifamily growth forecast at 5 percent rent growth in 2018

Development is not slowing down, as population growth and a thriving job market are fueling demand. Roughly 7,500 units are expected to come online in 2018, a projected 15 percent increase over 2017, when new units were quickly absorbed.

Rent growth remains above the national average, despite deceleration in the last few months of 2017. Yardi Matrix forecasts a 5 percent rent growth for 2

A study by the National Multifamily Housing Council and National Apartment Association found that the area will need more than 150,000 new apartments by 2030.

Yardi Matrix writes that, “Phoenix is an attractive market for investors due to above-trend rent growth and demand fueled by prolonged demographic expansion and tech job gains. In 2017, investors mostly focused on assets located outside the metro’s core, mainly in southeastern submarkets. Tempe, Mesa, Deer Valley, Gilbert and Chandler accounted for roughly half of the metro’s total transactions volume.”

Phoenix’s Strong Tailwind For Multifamily Growth

About Yardi Matrix:

The Yardi Matrix apartment information service is a high-performance system with the sole function of supporting the commercial apartment industry’s dominant participants. The company's services monitor the 50+ unit apartment universe from the property level to the submarket/market level in a form unique within the commercial apartment information industry.

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