The metro Phoenix multifamily market finished third quarter 2019 with strong absorption and completions, according to Cushman & Wakefield.
The market absorbed nearly 1,500 units during the third quarter, bringing the year-to-date net absorption total to 7,646 units, more than double the average annual absorption since 2000 of 3,343 units. The Glendale/West Valley (with absorption of 724 units), Northwest Valley (366 units) and Tempe (139 units) submarkets recorded the highest net gains in positive absorption in the third quarter of 2019. Chandler/Queen Creek (with negative absorption of 90 units) and Central Phoenix (–16 units) submarkets saw the largest negative absorption in the third quarter.
Although the market has strong net absorption, vacancy increased 10 basis points from third quarter 2018 (4.8 percent) to third quarter 2019 (4.9 percent), due to a large number of class A projects delivered during the quarter. The Scottsdale submarket vacancy rate declined from 5.1 percent in third quarter 2018 to 4.5 percent in third quarter 2019, making its 60 basis points drop in vacancy the largest decrease. The Central Phoenix, Northeast Valley and East Phoenix submarkets saw an increase in vacancy year-over-year, increasing by 70 basis points, 60 basis points and 50 basis points, respectively.
Asking rent growth remained positive in the third quarter, continuing its seventh year of positive rent growth. Average asking rates increased from $1,078 per unit in third quarter 2018 to $1,171 per unit in third quarter 2019, an 8.7 percent increase. The Ahwatukee ($1,176 per unit) and Mesa/Gilbert ($1,089 per unit) submarkets saw the largest year-over-year asking rate increases, rising 9.7 percent each. The Tempe submarket, with a rise of 6.8 percent, saw the lowest year-over-year rental rate increase, growing from $1,293 in third quarter 2018 to $1,380 in third quarter 2019. None of the submarkets recorded negative rental rate growth.
Multifamily development continues to grow in the metro Phoenix market, with 9,697 units completed across 44 properties, year-to-date. More than half of the new completions were delivered in the submarkets of Glendale/West Valley (2,002 units), Central Phoenix (1,973 units) and Chandler/Queen Creek (1,439 units).
Cushman & Wakefield is currently tracking more than 15,000 units that are under construction and an additional 22,000 units planned for development. The submarkets of Central Phoenix, Tempe and Chandler/Queen Creek have the most units under construction, at 3,483 units, 3,131 units and 2,320 units, respectively. The submarkets with the most planned units in the third quarter are Central Phoenix (5,313 units), Chandler/Queen Creek (3,023 units) and Northeast Valley (2,969 units).
Rental rates, net absorption and construction starts and deliveries are expected to remain high, as the metro Phoenix market continues to experience robust population growth.
