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After a long stagnation following the 2008 recession, Phoenix is now growing at such a rate that multifamily real estate construction is not keeping pace. As such, there are numerous investment opportunities in the current Phoenix multifamily market.

 

Multifamily Property Investing in Phoenix: 2018 Market Outlook Looks Positive

Dec 05, 2017

The real estate market has turned a corner in Phoenix. After a long stagnation following the 2008 recession, Phoenix is now growing at such a rate that multifamily real estate construction is not keeping pace. As such, there are numerous investment opportunities in the current Phoenix multifamily real estate market.

Employment and Retirement Driving Market

A thriving job market is the driving force behind the city’s renaissance, with high-income positions being created in the metropolitan area. From July 2016 to July 2017, 52,000 jobs were added in the Phoenix metropolitan area, with 11,900 of them in the medical and education fields.[1] Money Magazine named Phoenix No. 3 among the country’s hottest cities for tech jobs in 2017, and Intel has announced that it intends to invest $7 billion in suburban Chandler, creating 3,000 new jobs where it already employs 11,300 people.[2] Other major employers planning to add jobs in Phoenix include JPMorgan Chase, which is adding 4,000 jobs, State Farm, UPS, ADP, and Santander Consumer USA.[3]

A July 2017 survey by WalletHub compared quality-of-life metrics—such as the job market, average home square footage, rent-to-price ratio, and quality of public schools—in American cities and found that Phoenix and three of its suburbs were among the Top 12 best cities for renters with those criteria.[4]

Rental demand is being aided by strong population growth in the Phoenix metropolitan area. Besides professional families, retirees continue to move to Phoenix in considerable numbers, and that demographic is expected to grow significantly.

A study by the National Multifamily Housing Council and National Apartment Association found that the area will need 150,302 new apartments by 2030. That is a 38% increase over the current number.[5]

Another study estimated that there is a deficit of about 12,000 apartments in the Phoenix market now, and that number will increase to 18,000 by 2020. Experts say residential construction is falling behind commercial growth particularly in the eastern part of the metro area, and in North Tempe especially.[6]

Development Favors the Luxury Market

If you come to Phoenix, you’ll see building activity all around the city, and multifamily real estate construction is expected to continue to increase for the foreseeable future. As of mid-2017, 12,200 units were under construction and 17,000 more were planned. A total of 7,309 new units are expected to come onto the Phoenix metropolitan area market in 2017.[7] There is a clear transition underway from the construction of garden-style communities to mid-rise and high-rises apartment buildings in the area. The number of the latter increased from 29 to 42 in downtown Phoenix in 2016.

Supply is being added fastest in the luxury segment. Demand is also rising for luxury units in Phoenix, although in the long term, demand is projected to increase most for affordable housing. Rents were flat in 2016 and resumed growth in 2017.[8] Overall, rents had increased 5.3% year-on-year in July 2017. Class A rent rates rose 8.7% in Q2 2017. Classes B and C rose 6% and 7%, respectively, in the same period. Occupancy was at 95% at mid-year in 2017. More than 800 new units were added in high-priced central Phoenix in the first half of 2017.[9]

Multifamily real estate sales volume has shown a somewhat uneven ascent in the last few years. It reached a peak in early 2016 and then retreated, but is rising again in mid-2017. Sales are lively in the multifamily real estate market and sales of value-add properties are still taking place, although they have slowed down somewhat as prices have escalated.

Multifamily Property Investing in Phoenix: Working with an Expert

There should be many exciting investment opportunities in the Phoenix market as the real estate and development markets continue to grow. With so much opportunity, it can be helpful to have the guidance of a seasoned real estate investment management firm with years of local knowledge and experience. At CWS Capital Partners, we manage three multifamily investment properties in the Phoenix area and specialize in various investment types, including acquisitions, development, repositioning, and 1031 exchanges.

To learn more about multifamily real estate investment strategy in the Phoenix market, please visit our blog.

If you are interested in adding Phoenix assets to your portfolio, contact us today to get started.

 

The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.

All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.

Advisory services are provided by CWS Capital Partners LLC, a registered investment advisor.

Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.

 

[1] http://www.colliers.com/-/media/files/marketresearch/unitedstates/markets/greater phoenix/q2-2017/2017-q2-multifamily-greaterphoenix-report-colliers.pdf

[2] https://www.bizjournals.com/phoenix/news/2017/02/08/intel-investing-7-billion-in-chandler-facility.html

[3] https://www.bizjournals.com/phoenix/news/2017/03/30/jpmorgan-chase-building-big-new-campus-landing-4.html

[4] https://wallethub.com/edu/best-cities-for-renters/23010/

[5] https://www.weareapartments.org/data/metro/phoenix/

[6] https://azbigmedia.com/report-phoenix-doesnt-have-enough-apartments-short-term-either/

[7] http://www.colliers.com/-/media/files/marketresearch/unitedstates/markets/greater phoenix/q2-2017/2017-q2-multifamily-greaterphoenix-report-colliers.pdf

[8] http://www.eastvalleytribune.com/news/younger-tenants-driving-up-apartment-demand-in-region/article_a36219dc-8469-11e7-85b1-5347b86c8e48.html

[9] http://www.colliers.com/-/media/files/marketresearch/unitedstates/markets/greater phoenix/q2-2017/2017-q2-multifamily-greaterphoenix-report-colliers.pdf


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