By Thomas M. Brophy for ABI Multifamily
In last week’s article, What Slowdown? Phoenix Metro Multifamily Sales Crest $1.63B, we showed the incredible investor appetite for the Phoenix Metro’s multifamily market. While some markets across the US have decreased in overall transaction and sales volume, the Phoenix Metro is on pace to break multiple records both from an aggregate sales volume to average price per unit perspectives.
There are many reasons investors are bullish on Phoenix which we have discussed in great detail across many ABInsight articles. But what of the renter side? How is the red hot apartment market affecting renters, specifically, what are the average rental rates for the Phoenix Metro’s major cities? What of affordability and what kind of insights can be extracted by looking at each of those cities demographics?
Scottsdale saw the highest percentage increase in average rental rates, rising 52.1% from 2010 to its current $1,253. Tempe witnessed the second highest increase with 38.7% to $1,115 and in third, was Mesa which saw a 31% increase to $805. Whereas Mesa saw a higher percentage increase, Phoenix’s average rent, which increased 30%, was higher at $846. Last among the cities examined was Glendale who marked a 25% increase to rest at $775.
Despite sustained rental rate increases the Phoenix Metro still trends lower than comparative metros with similar sized populations which, if you run a straight-line average per year rental rate increase equates to: Scottsdale with 7.3% average/year increase, Tempe with 5.6%, Mesa with 4.6%, Phoenix with 4.5% and Glendale with 3.8%.
Population & Renter Occupied Housing
Based on current Census estimates, Mesa recorded the highest percentage increase in population at 19.0%, while the Phoenix recorded the highest actual population count from 2000 to 2015, increasing by 241,980 or 18.3%. Scottsdale rounded out the Top 3 with a population percentage increase of 16.8% or 34,134.
While population increases are of supreme importance, especially from a multifamily developer/investor standpoint, equally important is the percentage of housing, and population residing, classified as ‘Renter Occupied Housing.’
Glendale saw the largest net increase in ‘Renter Occupied Housing’ whose ranks swelled nearly 26% from 2000 to 2015. Phoenix, although 3rd in renter occupied housing increases from 2000, saw the largest percentage increase from 2010 with an 8.5% increase in renter occupied housing.
The Phoenix Metro has been at the epicenter of one of the most significant demographic shifts of the last 50+ years, particularly ownership v renter-ship metrics, ever witnessed in the metro and for that matter the United States. Neither continued rental rate increases, averaging 3.2% per year across the cities surveyed, nor sustained construction have dinted average occupancy rates which are currently hovering near 96%, well above historical trends.
In fact, all the cities surveyed, when adjusted to median household income amounts. fall well below the 30% affordability threshold. Due to all these factors, Phoenix and surrounding cities continue to attract an influx of both people and businesses.
Read more at ABI Multifamily