By Matt Pesch, Vice Chairman, CBRE
The multifamily market in Phoenix experienced a record-setting year in 2021. Market vacancy dropped below 3 percent for the first time, the region led all U.S. metros in year-over-year rent growth for every quarter and total multifamily investment sales volume topped $12 billion. This was nearly double the volume from 2019 and a 125 percent jump from 2020. These metrics are driven by Phoenix’s primary economic drivers of nation-leading population and job growth.
As of October, Phoenix was one of only four U.S. metros to recover 100 percent of the jobs the region lost during the pandemic. This was driven by the stable recovery of long-established industries and growing sectors that are diversifying the region’s employment base. Case in point: Phoenix is home to one of the fastest-growing biotech sectors in the U.S. with the life sciences workforce expanding by 8.5 percent from 2019 to 2020, according to CBRE’s latest research. Likewise, large corporate office users continue to relocate or expand in Phoenix at an unprecedented rate, further driving the region’s robust employment recovery.
Matt Pesch, Vice Chairman, CBRE
The area’s strong employment recovery and population growth are the fuel driving Phoenix’s multifamily sector. The gains in the apartment investment market in 2021 are highlighted by pricing that was previously unreachable. Of the more than 50 transactions our team closed in 2021, four pushed the price-per-door benchmark higher and higher to the current mark of about $543,000 per unit. Phoenix also saw the two highest single-asset sales values in the region’s history this year, including $325 million for a 1,222-unit property. These price tags are still significantly lower than those in coastal and some Tier I markets. Investors across the board — from private family capital to global institutional funds — find the comparable value of the Phoenix market and the region’s strong underlying economic fundamentals to be exceptionally attractive.
The Phoenix market offers stable, low-risk, income-generating assets with inherent upside potential. Given this dynamic, Phoenix’s multifamily investment sector is likely to stay strong in 2022. We anticipate sales activity to be exceptionally high, while potentially slightly below the record-breaking activity of this year. Pricing will continue to increase, although it may be difficult to match the unprecedented rate of increase in 2021. As last year illustrated, the region’s nation-leading population growth is positioned to absorb new multifamily units quickly. Construction labor shortages and entitlement challenges in Phoenix will make it extremely difficult for the supply pipeline to catch up with demand, resulting in continued high occupancy and outperforming rent growth for the foreseeable future. Phoenix will continue to be one of the hottest multifamily investment markets in the U.S. in 2022.