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 – Very Strong
The apartment completions in 2022, as of the end of Q3 are already 9,246 units (37 projects). The forecast for Q4 is an additional 9,648 units (44 projects). Due to labor and supply cost and shortage, not all the Q4 projects will be completed by year’s end, but we will likely have at least a 25% jump in total units completed compared to last year.
Currently there are 160 projects (38,455units) Under Construction, 111 projects (26,322 units) Planned and 203 projects (49,142 units) Prospective. That’s a total of 474 projects (113,919 units) in the pipeline. Metro Phoenix has possibly never seen numbers like this. Everyone continues to ask, “are we overbuilding?” The increased mortgage interest rates combined with the high inflation hamper the ability to purchase a home and partially offsets the increasing apartment supply.
Occupancy Decreasing – Rents Leveling & Under Pressure
For the past 5 years, Metro Phoenix has enjoyed very strong occupancy and amazing rent growth – sometimes leading the US. With the continued number of new apartment units being completed, most rents have now leveled, and occupancy has decreased. With the large number of projects in the new construction pipeline, the increased supply will continue to put pressure on rent growth and occupancy. The impact of the new construction could have been significantly more severe, except the time for completion has been extended due to labor and supply issues, but there are still many, MANY units in the pipeline. The high inflation is good and bad. It limits the ability to purchase a home which maintains the strong demand for rentals, but also limits the amount rents can be increased – or even held at current levels.
Since our Q2 2021 amazing 3.6% vacancy. we have seen a steady increase – now at 5.6% (94.4% occupancy). Since the beginning of this year, rental rates for upper and mid-range have leveled off but workforce house is still increasing. In-fact, lower workforce housing was up 12.4% year over year. As noted, with inflation affordability will be an issue going forward. The local issues with rents and occupancy are similar across the US, plus there are growing concerns by apartment developers and investors with the impact of the increasing interest rates as the Feds try to control inflation.