In order to provide apartment owners and investors the best up-to date information, we track quarterly market data on recent apartment sales, apartments for sale, occupancy, rental rates and new apt. construction. All market updates since 1998 are posted on our website.
New Apt. Construction – Still Increasing
The forecast apartment completions in 2022 are 126 projects with 29,152 units. Even with the increased new construction over the past few years, we have not had even 10,000 units completed per year. As with past forecasts and similar issues experienced in 2020 and 2021, not all forecast projects will be completed, but many will.
Currently there are 150 projects (36,601 units) Under Construction, 101 projects (25,284 units) Planned and 153 projects (37,389 units) Prospective. That’s a total of 404 projects with 99,274 units) in the pipeline. Metro Phoenix has possibly never seen numbers like this. Everyone continues to ask “are we overbuilding?” With the shortage of housing, increased housing prices, the challenge of having a house offer accepted, the increased desirability of apartment living, and the continued strong net population migration is expected to continue to support a high occupancy, but challenges exist.
Occupancy and Rents Strong but Under Pressure
Occupancy for all class units reached a 20-year high in Q2 2021 with 96.4% (3.6% Vacancy). Since then, we have seen a slight, but steady, decrease in occupancy – now at 95.5% (4.5% vacancy).
Rental rates are still increasing, but just like occupancy, this has slowed over Q1. In 2021, the rental rates for all class properties increased 25.0%. This led all major metropolitan cities in the US. In Q1, we only had an increase of 2.0% – significantly lower growth.
The trend in lower occupancy and less rental rate growth is expected to continue. Here are some of the reasons. There will be a surge in new construction completions – adding to the overall supply with preleasing already having an impact. Houses being built for rental is also an exploding industry with 8,553 homes in the pipeline. Affordability may be the single most important concern.
Again, there are still strong very positives for the multifamily sector. For example, housing prices have jumped making it harder to buy (32.6% last year), young people starting to leave mom and dad, mortgage rates are increasing and the cost of living due to inflation. All that said, the most important variables to watch will be the amount of population growth, availability of water to support this growth, possible government regulations/fiscal policies and inflation.