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Apartment Market Falls in National Ranking

PHOENIX-Region falls to 31 on Marcus & Millichap's National Apartment Index. The report blames the ills of the multifamily sector on the 'shadow' market of private homes for rent .

By John McCloud | Updated on January 02, 2009

PHOENIX-A “shadow” rental market created by a glut of vacant singlefamily homes and condos will continue to generate challenges for local apartment building owners, according to the 2009 forecast from Marcus & Millichap. The real estate investment services company ranks Phoenix number 31 on its National Apartment Index, down 12 places from its number 19 ranking last year.

According to Linwood Thompson, senior vice president and managing director of the firm’s National Multi Housing Group, the shadow stock’s greatest impact is being felt in outlying areas such as the Chandler/Gilbert and Goodyear/Avondale submarkets. These areas were hubs for new construction and speculative buying during the recent housing boom, and the report projects apartment vacancy rates there to trend up to the mid-teens this year. By contrast, says Thompson, affluent locations such as Scottsdale face less of a threat due to the smaller number of homes and condos being offered for rent.

Thompson blames continued employment reductions for the market’s drop in his firm’s rankings. The region is forecast to lose 28,000 jobs this year, a 1.6% drop, on top of a loss of 85,000 jobs in ’08. The employment decline has resulted in people moving out of the area or doubling up to save money, decreasing apartment demand. But Thompson says completion of new projects also contributed to the drop in rankings. According to the report, Phoenix added some 5,000 apartments to its inventory in ’08 and will add 2,200 more in ’09.

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