Multifamily Recovery Impressive in Volume and Demand

Brophy says the multifamily recovery has been nothing short of phenomenal.

PHOENIX—The Phoenix Metro multifamily market surpassed $3.8 billion in total sales volume, up 34% year over year and almost 265% since 2010′s more than $1 billion in sales volume, according to ABI Multifamily ‘s 2015 multifamily market report. Phoenix market’s trajectory since 2010 shows huge gains in the multifamily market as an asset class. Vacancy rate has dropped to an all-time low of 5.2%, which in historical perspective is some 5%-plus below normal operating conditions. In addition, average effective rents have increased nearly 25% during the same time period. Thomas M. Brophy , director of research at ABI, tells GlobeSt.com: “The Phoenix Metro’s multifamily recovery has been nothing short of phenomenal in terms of both sales volume, rising some 245% from 2010 to 2015, and fundamental demand, with vacancy rates at or near all-time lows across all submarkets and greater Phoenix Metro. Despite developers increasing appetite for new construction, as evidenced by our recently released construction pipeline report, we are still under-supplied for the Metro as a whole which stems from (1) lack of supply in the immediate years following the Great Recession and (2) an absolute explosion in the rate of renter household formation.” There are multiple forces at play fueling the multifamily fire including population growth. Although lower by historical standards which trend 10%-plus, the Phoenix Metro has grown nearly 7% to 4,474,800 gaining approximately 282,000 persons. Even more fundamental than population growth has been the absolute explosion of the renter household since 2005. If current population estimates are accurate at 45%, this impacts more than 175,000 households representing a combined population of approximately 450,000 people, says ABI. The single-family home market, which still hasn’t fully recovered from the 2007/08 Great Recession, combined with ongoing negative impacts of TRID/RESPLA, should continue to fuel the multifamily asset class as more people need to rent. Job growth, especially in the Downtown CBDs of Downtown Phoenix, Old Town Scottsdale and Tempe, indicates 10,000-plus job announcements (many of which pay $45,000-plus per year), corporate relocations and aggressive courting by economic development officials, concludes ABI.