Source: Colliers International
Colliers International released its Greater Phoenix Multifamily Research and Forecast Report for first quarter 2016.
The Greater Phoenix multifamily remains on a roll and is forecast to continue the extended run of strong property performance through the rest of this year. Vacancy reached a 20-year low during the first quarter, even as new development continues at a healthy clip, and is forecast to remain low.
- Multifamily developers remain active, bringing more than 1,500 units online in the first quarter. During the past 12 months, nearly 7,000 units have been delivered to the Greater Phoenix area.
- Approximately 10,000 units are under construction, with deliveries for 2016 expected to top 5,600 units.
- Vacancy ended the first quarter at 5.2 percent, 50 basis points lower than one year ago. More than half of the submarkets in the Valley feature vacancy rates of 5 percent or lower.
- Some of the lowest vacancy submarkets include South Paradise Valley in the northeast, Goodyear/Avondale to the west and the Ahwatukee Foothills submarket in the southeast.
With vacancy tightening and new, more expensive units being delivered, rents are rising rapidly. Asking rents have been trending higher since 2012, but the pace of gains has been accelerating over the past 24 months.
- Asking rents expanded by more than 3 percent in just the first three months of 2016, setting the stage for what is forecast to be the strongest year of rent growth in more than a decade. Gains have been widespread across all property classes and submarkets.
- Year over year, asking rents have increased 7.4 percent to $899 per month. Over the past 24 months, asking rents have increased by more than $100 per month, or 13.2 percent.
- Rents in the Class A segment of the market are recording some of the strongest gains. Class A asking rents have increased by 9 percent in the past year, to $1,337 per month, or $1.36 per square foot, per month.
Demand for rentals is being boosted by population gains and a thriving local employment market. Employment expansion will continue to fuel renter demand for multifamily units.
With vacancy at a 20-year low, operating conditions will remain tight through the remainder of the year. Additions to rental and for-sale inventory will not present enough of a supply threat to offset the ongoing surge in renter demand for apartments.
The strong cash flows brought on by tight conditions and surging rents are attracting buyers and fueling price appreciation. Rents are forecast to continue to advance at a healthy pace in 2016, and this rent growth is helping to push prices higher.