Demand Keeps Up With Supply in Phoenix
Healthy employment and demographic trends are boosting multifamily demand in the Valley of the Sun, where rent growth is expected to reach 5.0 percent this year.
Thanks to its warm climate and low business costs, Phoenix has slowly turned into a magnet for companies relocating from nearby California, pushing healthy demographic trends and boosting housing demand in the process. As a result, rents rose 4.0 percent year-over-year as of April, with further improvement in the cards for the Valley of the Sun.
Phoenix added 60,000 jobs through February, up 2.7 percent year-over-year and well ahead of the national rate. Tech companies have flocked to the Silicon Desert of late, a case in point being Galvanize, the Denver-based technology learning community, which opened a refurbished 58,000-square-foot warehouse, transforming it into a startup hub and learning center for the industry. Intel is working on its $7 billion Fab 42 project, which at full capacity is expected to host as many as 3,000 engineers.
Investors have set their eyes on Phoenix: The transaction volume exceeded $1.4 billion in multifamily properties in the first four months of the year, pushing the per-unit price up to $144,603. Nearly two-thirds of the deals traded RBN assets, reflecting investor interest in Phoenix’s ample value-add opportunities. Apartment construction is strong, with more than 16,600 units underway and 26,000 in the planning and permitting stages. As a result, we expect rent growth to reach 5.0 percent in 2018.