PHOENIX-As a whole, the multifamily market here is in recovery mode, but the variance in neighborhood-level performance is “as extreme as you’ll see anywhere across the country,” according to Greg Willett, vice president of research & analysis for MPF Research.
The performance differential is illustrated by rent growth, Willett notes. Most of metro Phoenix’s rent growth is occurring in the upscale east side suburbs, where occupancy is at or approaching essentially full levels. “For those areas it certainly makes sense to start building again, as long as land was acquired at prices that make total development costs feasible,” he tells GlobeSt.com, adding that Chandler’s occupancy is 95.6%, and the rate is above 94% throughout Scottsdale, Tempe and Gilbert.
The strongest rent growth during the year-ending June was in South Tempe at 9.7%, Chandler at 8.3%, and North Scottsdale at 8.2%. In contrast, rents have barely nudged during the past year on metro Phoenix’s west side. North Glendale and South Glendale, the two weakest neighborhood-level performers, registered rent growth of less than 1%, according to MPF Research.
On a marketwide basis, effective rents jumped 4.2% between June 2010 and June 2011. That local increase is a little better than the national average rent growth of 3.8% seen since the middle of 2010. Monthly rents in Phoenix apartments now average $733.
“Pricing in the Phoenix apartment market has by no means fully recovered, since today’s rates are still nearly 10 percent below the previous peak,” Willett says. “Importantly, though, the momentum is there. It’s significant and perhaps a bit surprising that the market has already caught up to the annual rent growth pace in the nation as a whole, especially when US rents are going up at a level that’s ahead of the long-term norm.”
MPF Research anticipates that strong momentum in Phoenix’s apartment market performance will be sustained during the near term. The firm is forecasting an occupancy jump of nearly 2% by the middle of next year, and rents are projected to climb more than 5% in that time frame.
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