The Greater Phoenix multifamily market recorded mixed performance in the second quarter. Vacancy ticked higher, which is a fairly common occurrence in the Phoenix metro as some seasonal residents retreat to cooler climates to avoid the summer heat. Despite the short-term vacancy uptick, the rate is still at its second-lowest point over the past 10 years. While vacancy inched up over the past few months, rents continue to rise. Following a gain of more than 2 percent in the first quarter, asking rents surged by more than 1.5 percent in the second quarter. This robust rent growth is being recorded at a time when rentals are becoming increasingly attractive and owners are upgrading existing units in efforts to fuel NOI growth.
Investment activity has been healthy thus far in 2015, with prices and activity levels outpacing last year’s figures and cap rates compressing slightly. Tight vacancies and rising rents will continue to attract buyers to the market in the coming quarters, although a few owners may choose to take some profits following a more than 60 percent increase in the median price over the past five years. These conditions, along with available and affordable financing, should continue to fuel transaction activity between now and the end of the year.
