Greater Phoenix Multifamily Heading Toward Stabilization After Weak Q4
Through many key categories in Greater Phoenix's multifamily sector, the fourth quarter performance was sluggish? but the market might be poised for sunnier days ahead.
A big issue was that supply continued to exceed demand. While net absorption remained positive at 2,765 units, the amount was less than the 4,103 deliveries posted in the fourth quarter, according to a market report from Colliers. Also, demand was down from the 4,367 units seen a year ago.
The trend of supply outpacing demand seemed to weigh on other core fundamentals in the fourth quarter. Rental rates for one, dipped by 2.3 percent year-over-year to $1,581. While occupancy improved by 30 basis points to 93.3 percent year-over-year, the category remains down over three percentage points since the second quarter of 2021.
"Scottsdale was the only submarket to record positive annual rent growth, with all other submarkets experiencing rent declines," Colliers said.
On the bright side, however, rents are up nearly 30 percent since the second quarter of 2020.
Another positive was that investor interest was high in the fourth quarter, with volume climbing by 45 percent to $807.3 million. The largest deal involved SolVida Central trading hands for $88 million in Downtown Phoenix, followed by BB Living at Union Park selling for $80.20 million in Deer Valley and Konrad going for $77 million in Downtown Phoenix.
Going forward, Colliers forecasts that the market will move toward "stabilization" thanks to both new supply and construction slowing.
"While near-term rent growth may remain constrained, sustained population growth and investor interest should support longer-term fundamentals as supply and demand begin to realign," the CRE firm further predicted.
Source: GlobeSt/ALM