Q4 2022 Multifamily Real Estate Report: Phoenix, AZ
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Phoenix is known for being a family-friendly city, with various activities and attractions for children and parents alike, such as the Children’s Museum of Phoenix and the Arizona Science Center.
Unemployment in the city declined to 2.9% by the end of Q4 2022, lower than the national average. There was a 1.48% population increase for its metro area in 2022.
Q4 2022 saw increased vacancies and falling rents for Phoenix’s multifamily real estate market.
General Area Overview & Demographics
Phoenix has a population of approximately 1.7 million people as of 2021. The city has a high percentage of Hispanic or Latino residents, making up nearly 44% of the population, while non-Hispanic whites comprise about 38%.
Phoenix, AZ Median Household Income & Population
Median household income in Phoenix is around $60,000 annually, with a wide range of income levels. The city has a growing job market in various industries, including healthcare, technology, and finance, which has helped to increase household incomes in recent years. In fact, data shows that Phoenix residents tend to keep up with monthly rent payments.
Its population is relatively young, with a median age of 33. The city has many millennials and Generation Z residents, and the older population is also increasing due to the availability of senior living communities.
Arizona State University is the largest university in the city and is known for its strong engineering and business programs. Other major universities include Grand Canyon University and the University of Arizona College of Medicine-Phoenix.
Major attractions include the Desert Botanical Garden, the Phoenix Zoo, and the Heard Museum, which showcases Native American art and culture. The city also has several sports teams, including the Phoenix Suns, Arizona Cardinals, and Arizona Diamondbacks.
Phoenix has a hot desert climate, with long, hot summers and mild winters. The city averages about 300 days of sunshine annually and has low humidity levels, making it a popular destination for outdoor activities such as hiking and golfing. However, temperatures can reach well over 100 degrees Fahrenheit in summer.
Summary of Phoenix Multifamily Real Estate Performance in Q4 2022
Overall vacancies for Phoenix multifamily real estate reached a 10-year high at 8.5%, an increase over Q3 2022’s numbers. In fact, Phoenix multifamily vacancies have steadily risen since Q4 2021, increasing by over 55% year-over-year.
Multifamily absorption for Phoenix was 914 units in Q4 2022; annually, 2022 brought some of the lowest multifamily absorption that Phoenix has seen in recent years.
What are multifamily rents like in Phoenix?
Average rents for Phoenix multifamily real estate were $1,617 per month in Q4 2022, a decline from Q3’s $1,630. Multifamily rents in Phoenix have steadily decreased since Q2 2022.
For a studio apartment, rents averaged around $1,190 a month. Three-bedroom apartments averaged rents around $2,070.
Purchase & Leasing Activity
The annual median price per unit for Phoenix multifamily real estate was $287,000 at the close of 2022, a 30% increase from 2021’s price. The median price per unit for Q4 2022 alone was $240,000.
Multifamily sales velocity in Phoenix dropped by over 30% from Q3 2022 to Q4 2022. Transaction volume also saw a sharp fall of 60% year-over-year.
Notable Multifamily Real Estate Deals in Phoenix in Q4 2022
There were several notable deals that took place for Phoenix’s multifamily real estate in Q4 2022:
- JB Partners purchased Seventyone15 McDowell for $150 million.
- Hudson Advisors L.P. purchased Lucent Scottsdale for $103 million.
- Investors Capital Group purchased Desert Mirage Luxury Apartments for $86 million.
- Hamilton Zanze Company purchased Crestone at Shadow Mountain for $79 million.
- SB Real Estate Partners purchased Portola West McDowell for $73 million.
These are select examples among other activity.
New Multifamily Real Estate Development Activity in Phoenix in Q4 2022
Around 3,200 new units of Phoenix’s multifamily real estate came online in Q4 2022, bringing annual new deliveries close to 13,000, a 5% decline from 2021.
At the end of 2022, over 34,000 new multifamily units were in the pipeline for development. The Goodyear/Avondale submarket accounts for more than 9,000 of those units.
Market Forecast for Phoenix’s Multifamily Real Estate Market
For the year ahead, it’s likely that a steep rise in vacancies across much of the multifamily real estate market in Phoenix will result from new additions to supply exceeding demand.
Developers responded to surges in renter demand and some of the most rapid rent growth in the country by moving more than 100 new projects into the construction pipeline since 2021.
Expect the pace of new multifamily deliveries in Phoenix to peak between 2023 and 2024, resulting in supply-side pressures.
Takeaways for Multifamily Real Estate Investors
The region’s long-term demand drivers remain healthy, and new developments are located along the path of growth.
Investors can expect these trends to continue in Phoenix’s multifamily real estate market.
Stay diligent, do your research, and happy investing.
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