Jessica Morin
The Phoenix multifamily market will benefit from its late-cycle start. Phoenix was hit hard by the Great Recession and took several years to recover—much later than other cycles. As a result, the market is expected to have a long runway of growth ahead and will likely suffer a reduced impact during the next downturn. According to research from CBRE, Phoenix has the second-highest rent growth in the nation, behind Las Vegas with a constrained construction pipeline.
“The Phoenix multifamily market is benefiting from its position as one of the top markets in the country for job and population growth,” Jessica Morin, senior research analyst at CBRE, tells GlobeSt.com. “Phoenix arrived later to the recovery than other markets, but its growth has been sizeable over the last several years while other markets are beginning to slow.”
A growing economy, market by both job and wage gains and increased inward migration, has been integral to the multifamily growth in the market. This trend has not only supported rent growth but also demand for more housing. “The increase in jobs and influx of new residents, which averages to about 174 people to Phoenix each day, is driving the need for more housing,” says Morin. “Simultaneously, the market is building less single-family homes than it has in past cycles. In 2005, there were more than 60,000 housing permits compared to about 22,000 permits today. The significant drop in single-family housing is fueling demand more multifamily, keeping vacancy low and supporting rent growth.”
This dynamic economy—which is much more diverse than it was a decade ago during the last recession—will also help to mitigate the impact of the next downturn, whenever it comes. “During the last recession, the market was significantly impacted because of its reliance on sectors that were dependent on growth itself, like housing and construction,” says Morin. “The metro lost about 300,000 jobs and nearly a quarter of those jobs were in the construction sector alone. Today, we have more than recovered all jobs and even more notable is that the growth is diverse across sectors. This diversity insulates the metro from future economic shocks that impact a single sector.”
Specifically, the finance, healthcare, technology and high-tech manufacturing markets are leading the job and wage growth in Phoenix. “[These industries] produce high-quality jobs and lifting up the overall quality of life in the metro, making Phoenix stronger today and shaping our bullish metro outlook,” adds Morin.
While Phoenix is poised for growth and buffered for economic turmoil, there doesn't appear to be a downturn on the horizon. “Phoenix has more runway and there are no immediate indicators that point to a slow down,” says Morin. “The outlook is bright over the next year. The metro's talent pool is growing and catching the attention of employers who are expanding into Phoenix and adding quality jobs.”
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Kelsi Maree Borland
