Multifamily investment activity is soaring in Phoenix. Multifamily investment increased 37.7% in the first seven months of the year, totaling $4.7 billion, according to a new report from CBRE. Tier II markets, like Phoenix, overall led multifamily investment activity this year, up 18.5% over last year and totaling $37.5 billion of investment activity. Phoenix is certainly a leader among this market segment.

"Phoenix is one of the leading markets in the country for population and job growth, which fuels renter demand for multifamily housing," Asher Gunter, an EVP at CBRE, tells GlobeSt.com. "Occupancy in Phoenix is over 96% and year-over-year rent growth is one of the highest in the U.S.  These strong economic fundamentals are very attractive to investors who see Phoenix as a durable investment option and a top target market."

Better yields compared to top tier markets in neighboring California have been driving the investment activity. While cap rates are still attractive by comparison, the investment activity has compressed cap rates. "Cap rates in Phoenix remain very attractive on a relative basis when compared to other Western U.S. markets, especially in light of the growth we are seeing," says Gunter. "Strong investor interest in Phoenix has made the bidding environment very competitive and is translating to cap rate compression and higher pricing. Overall returns are still attractive and the market continues to outperform."