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PhoenixMultifamily Q3 2019
MARKETBEAT
PHOENIX MULTIFAMILY
Overall Absorption (1)
Overall Asking Rent vs. Overall Vacancy (1)
Market Indicators (Overall, All Classes)
Q3 18 Q3 19 12-Month Forecast
Vacancy 4.8% 4.9%
Net Absorption 2,200 1,400
Under Construction 1,500 15,100
Average Asking Rent $1,078 $1,171
Q3 18 Q3 19 12-Month Forecast
Phoenix Employment 2,118k 2,172k
Phoenix Unemployment 4.1% 4.3%
U.S. Unemployment 3.8% 3.7%
Q3 data is based on the U.S. Bureau of Labor Statistics, All Employees: Total Non-farm in Phoenix-Mesa-Scottsdale, AZ (MSA).
Economic Indicators
(8,000)
(6,000)
(4,000)
(2,000)
-
2,000
4,000
6,000
8,000
10,000
12,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD2019
Absorption Avg Annual Unit Abs (2000- 2018)(1)
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
$600
$700
$800
$900
$1,000
$1,100
$1,200
$1,300
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD2019
Rent Per Unit Vacancy Rate Avg Vacancy Rate (2000- 2019)(1)
Economy
The Metro Phoenix economy continues to improve, adding 54,300 jobs year-over-year (yoy) through the third quarter of 2019. During the same period, the unemployment rate increased from 4.1% to 4.3%.
Market Overview
The Metro Phoenix multifamily market finished the third quarter of 2019 with strong absorption and completions. The market absorbed nearly 1,500 units during the third quarter, bringing the year-to-date (ytd) net absorption total to 7,646 units, more than double the average annual absorption (3,343 units) since 2000. The Glendale/West Valley (724 units), Northwest Valley (366 units) and Tempe (139 units) submarkets recorded the highest net gains in positive absorption in the third quarter of 2019. Chandler/Queen Creek (-90 units) and Central Phoenix (-16 units) submarkets saw the largest negative absorption in the third quarter of 2019.
Although the market has strong net absorption, vacancy increased 10 basis points (bps) from the third quarter of 2018 (4.8%) to the third quarter of 2019 (4.9%), due to a large number of Class A projects delivered during the quarter. The Scottsdale submarket vacancy rate declined from 5.1% in the third quarter of 2018 to 4.5% in the third quarter of 2019, making its 60 bps drop in vacancy the largest decrease. The Central Phoenix (-70 bps), Northeast Valley (-60 bps) and East Phoenix (-50 bps) submarkets saw an increase in vacancy yoy.
Asking rent growth remained positive in the third quarter, continuing its seventh year of positive rent growth. Average asking rates increased from $1,078 per unit in the third quarter of 2018 to $1,171 per unit in the third quarter of 2019, an 8.7% increase. The Ahwatukee ($1,176 per unit) and Mesa/Gilbert ($1,089 per unit) submarkets saw the largest yoy asking rate increases of 9.7% each. The Tempe submarket (6.8%) saw the lowest yoy rental rate increase, growing from $1,293 in the third quarter of 2018 to $1,380 in the third quarter of 2019. None of the submarkets recorded negative rental rate growth.
Multifamily development continues to grow in the Metro Phoenix market with 9,697 units completed across 44 properties, ytd. Over half of the new completions were delivered in the Glendale/West Valley (2,002 units), Central Phoenix (1,973 units) and Chandler/Queen Creek (1,439 units) submarkets. Cushman & Wakefield is currently tracking over 15,000 units that are under construction and an additional 22,000 units planned for development. Central Phoenix (3,483 units), Tempe (3,131 units) and Chandler/Queen Creek (2,320 units) submarkets have the most units under construction. Central Phoenix (5,313 units), Chandler/Queen Creek (3,023 units) and Northeast Valley (2,969 units) submarkets had the most planned units in the third quarter of 2019. Rental rates, net absorption and construction starts and deliveries are expected to remain high as the Metro Phoenix market continues to experience robust population growth.
PhoenixMultifamily Q3 2019
MARKETBEAT
Average Price Per Unit History (1)
ONE BEDROOM APARTMENTS HAVE SEEN THE LARGEST GROWTH IN RENTAL INCREASES, RISING OVER 78.2% SINCE 2000
Average Cap Rate (2)
METRO PHOENIX CAP RATE AND THE 10 YEAR U.S. TREASURY RATE ARE BELOW HISTORICAL AVERAGES AND ABOVE THE HISTORICAL AVERAGE CAP RATE SPREAD OF 3.0%
Interest Rates (3)
FEDERAL FUNDS TARGET RATE FORECASTED TO REDUCE IN THE NEAR FUTURE
Sales Transaction Volume (5)
Q3 2019 TRANSACTION VOLUME OF 154 PROPERTIES WAS 259.3% OF THE 19 YEAR ANNUAL AVERAGE OF $2.2 BILLION
New Inventory (4) TOTAL NUMBER OF NEW INVENTORY YTD 2019 WAS HIGHER THAN THE 15 YEAR AVERAGE OF 4,905 UNITS
Population (5) POPULATION GROWTH IS EXPECTED TO STRENGTHEN THROUGH 2023
2 | cushmanwakefield.com
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2005 2007 2009 2011 2013 2015 2017 2019
Average Cap Rate Avg. 10 Year Note
20 year average cap rate: 6.6%
20 year average 10 year treasury rate
(2)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2011 2012 2013 2014 2015 2016 2017 2018 F2019 F2020
Prime Rate 10-Yr Note Conventional 30-Year Fixed Rate(3)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q3 2019
15 Year Average: 4905 Units
3,000
3,250
3,500
3,750
4,000
4,250
4,500
4,750
5,000
5,250
5,500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023(7)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2005 2007 2009 2011 2013 2015 2017 YTD 2019
Milli
ons
19 year average: $2.2 Billion
(6)
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2005 2007 2009 2011 2013 2015 2017 Q3 2019
Studio 1 Bed 2 Bed 3 Bed All
PhoenixMultifamily Q3 2019
MARKETBEAT
cushmanwakefield.com | 3
INVENTORYUNIT
Q3 VACANCY RATE
NET ABSORPTION IN UNITS RENTAL RATE PER UNIT
UNITS UNDER CONSTRUCTION
UNITSPLANNEDQ3 2019 TOTAL
SUBMARKET
Ahwatukee 12,175 4.6% 18 -137 $1,176 348 378
Central Phoenix 24,505 5.6% -16 593 $1,293 3,483 5,313
Chandler/Queen Creek 24,713 5.0% -90 465 $1,336 2,320 3,023
East Phoenix 19,952 5.3% 35 822 $1,102 727 809
Glendale/West Valley 31,369 4.5% 724 1,440 $1,048 1,564 1,762
Mesa/Gilbert 44,838 3.9% 105 439 $1,089 694 2,251
Northeast Valley 32,946 5.6% 52 1,481 $1,159 1,027 2,969
Northwest Valley 28,161 4.9% 366 991 $1,108 765 914
Scottsdale 23,150 4.5% -5 456 $1,474 1,068 1,962
Tempe 32,587 5.1% 139 623 $1,380 3,131 1,961
West Phoenix 32,247 5.0% 114 473 $868 0 416
TOTAL 306,643 4.9% 1,442 7,646 $1,171 15,127 21,758(1)
2019 Key Sales Transactions (1)
Year Over Year Sales Comparison (1)
PROPERTY NAME CITY SALE DATE UNITS YEAR BUILT AVG SF PRICE PRICE/UNIT PRICE/SF CLASS SELLER/BUYER
Denim Scottsdale Scottsdale 7/25/2019 644 1980 783 $141,250,000 $219,332 $280.12 B TruAmerica Multifamily / Bluerock Real Estate, LLC
Carter Scottsdale 6/4/2019 365 2018 863 $117,800,000 $322,740 $373.97 CORE JLB Partners / Redwood Capital Group
Sterling 920 Terrace Tempe 8/28/2019 260 2018 1166 $115,000,000 $442,308 $379.34 A The Dinerstein Companies / Coastal Ridge Real Estate
Bella Mirage Avondale 4/16/2019 715 2009 959 $112,000,000 $156,643 $163.34 A Priderock Capital Management / Milestone Investments LLC
Biscayne Bay Chandler 9/17/2019 512 2000 929 $110,250,000 $215,332 $231.79 A Everest Holdings/Alliance Bernstein / MG Properties Group
San Valiente Phoenix 7/31/2019 604 1997 937 $100,000,000 $165,563 $176.69 A Milburn & Company / The Blackstone Group
The Stetson Scottsdale 2/27/2019 316 2015 857 $97,000,000 $306,962 $358.18 CORE Cottonwood Residential / Camden Property Trust
Harper Tempe 5/17/2019 367 2017 1,026 $93,800,000 $255,586 $249.11 A JLB Partners / The Praedium Group
Tempo at McClintock Station Tempe 2/28/2019 424 2017 792 $89,200,000 $210,377 $265.63 A Fore Property Compay / The Bascom Group
Avion on Legacy Scottsdale 2/15/2019 322 2015 918 $88,300,000 $274,224 $298.72 A Simpson Housing / Nuveen Real Estate
2019
4
$141.93 $118.94 10
$101.94 $122.10
4
$76.81 $92.97
# of Transactions Per Unit (Thousands) Price Per SF
YTD 2016
Class A Class B Class C
2018 2017
62
$164.06 $172.05 44
$94.41 $119.48
60
$71.35
$104.84
# of Transactions Per Unit (Thousands) Price Per SF
2017
Class A Class B Class C
67
$194.89 $206.96 43
$123.62 $160.45
55
$90.25
$137.26
# of Transactions Per Unit (Thousands) Price Per SF
2018
Class A Class B Class C
24$198.79 $211.84
17
$113.83 $138.38
20
$100.83
$147.62
# of Transactions Per Unit (Thousands) Price Per SF
2019
Class A Class B Class C
62
$164.06 $172.05 44
$94.41 $119.48
60
$71.35
$104.84
# of Transactions Per Unit (Thousands) Price Per SF
2017
Class A Class B Class C
67
$194.89 $206.96 43
$123.62 $160.45
55
$90.25
$137.26
# of Transactions Per Unit (Thousands) Price Per SF
2018
Class A Class B Class C
24$198.79 $211.84
17
$113.83 $138.38
20
$100.83
$147.62
# of Transactions Per Unit (Thousands) Price Per SF
2019
Class A Class B Class C
59
$204.98 $221.60 42
$133.91 $166.52
50
$96.73
$143.82
# of Transactions Per Unit (Thousands) Price Per SF
2019
Class A Class B Class C
PhoenixMultifamily Q3 2019
MARKETBEAT
MULTIFAMILY SUBMARKETS
APACHE TRL
HAW
ESRD
QUEEN CREEK RD
RITTENHOUSE RD
WARNER RD
G UA DALUPE RD
KYRE
NE
RD
CENT
ER S
T
COUN
TRY
CLUB
DR
USE
RYPA
SSRD
DOB
SON
RD
RAY RD
FRYE RD
COO
PER
RD
MCQ
UEEN
RD
BROADWAY RD
SKY H ARBOR BL VD
PEORIA AVE
WADDELL RD
INDIAN SCHOOL RD
PERR
YVIL
LE R
D
AIRP
ORT
RD
DEAN
RD
ESTRELLA DR
LITC
HFIE
LD R
D
ELM
IRA G
ERD
BULL
ARD
AVE
REEM
S RD
SARI
VAL
AVE
THUNDERBIRD RD
DIXILETA DR
LONE MOUNTAIN RD
HAPPY VALLEY RD
CAVE CRE
EKRD
16TH
ST
DE ER VALLEY DR
BELL RD
32ND
ST
40TH
ST
48TH
ST44
TH S
T
SIGN
AL B
UTTE
RD
103R
D AV
E
MAY O BLVD
SARI
VAL
AVE
EL M
IRAG
ERD
HAYD
EN R
D
JOMAX RD JOMAX RD
TUTH
ILL
RD
PATTON RD
DOVEVALLEY RD
195T
H AV
E
163R
D AV
E
51ST
AVE
43RD
AVE
BULL
ARD
AVE
BUSH HWY
GRAND AVE
GRAND AVE
ES
TREL
LA
PKY
ELLS
WO
RTH
RD
HIGL
EY R
D
SAGUA
RO BLVD
GREE
NFI
ELD
RD
HIGL
EY R
D
PINNACLE PEAK RD
COTT
ON
LN
CITR
US R
D
99TH
AVE
64TH
ST
56TH
ST
SCO
TTSD
ALE
RD
CAMELBACK RD
PRIC
E RD
CRO
ZIER
RD
203R
D AV
E
HAPPY VALLEY RD
DEER VALL E Y RD
CRO
ZIER
RD
LONE MOUN
TA IN PKY
GLENDALE AVE
FORT
MC
DOW
E LL
RD
CENT
ER S
T
RAY RD
NARRAMORE RD
ELLIOT RD ELLIOT RD
INDIANSPRINGS RD
RAINBOWVALLEY
RDRIGGS RD
CHANDLERHEIGHTS RD
HAW
ES R
D
SAN
TACR
UZRD
ST
JOHNS
RD
S ONOR A N DESERT DR
ELLS
WO
RTH
RD
HAPPY VALLEY PKY
56TH
ST
THOMAS RD
BETHANYHOME RD
COO
PER
RD
INDIANBEND RD
MAIN ST
RIO SALADO PKY
MC-85
LOWER BUCKEYE RD
GRAND AVE
43RD
AVE
35TH
AVE
HUNT HWY
ALM
ASC
HO
OLRD
QUEEN CREEK RD
ALM
A SC
HOOL
RD
SHEA BLVD
UNIVERSITY DR
GILB
ERT
RDGI
LBER
T RD
RECK
ER R
D
LIND
SAY
RD
PINA
L CO
UNTY
MARICOPA COUNTYPINAL COUNTY
MAR
ICO
PA C
OUNT
Y
PINA
L CO
UNTY
CAREFREE HWY WESTLAND RD
JOMAX RD
HAW
ES R
D
BELL RD
SHEA BLV D
RAY RD
7TH
ST
CAVE
CRE
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D
TATU
M B
LVD
UNIVERSITY DR
OLIVE AVE
7TH
AVE
19TH
AVE
VIA LINDA
BROWN RD
16TH
ST
35TH
AVE
99THAVE
PIM
A RD
RIGGS RD
RURA
L RD
PECOS RD
BELTLINE RD
HUNT HWY
MCKELLIPS RD
CACTUS RD
GREENWAY RD
DYSA
RT R
D
40TH
ST
CHANDLER BLVD
NORTHERN PKY
32ND
ST
OCOTILLO RD
27TH
AVE
ESTR
ELLA
PKY
MCDOWELL RD
SOUTHERN AVE
107 T
HAV
E
CHANDLER HEIGHTS RD
48TH
ST
DOBBINS RD
STAP
LEY
DR
MES
A D
R
POW
ER R
D
PIM
A RDTHOMAS RD
VAN BUREN ST
JACK
RABB
IT T
RL
DYNAMITE BLVD
PINNACLE PEAK RD
64TH
ST
32ND
ST
EL M
IRAG
E RD
BETHANY HOME RD
COT
TO
NLN M
ILL
AVE
BASELINE RD40TH
ST
PRIE
ST D
R
LINCOLN DR
16TH
ST
CENT
RAL
AVE
CURRY RD
THUNDERBIRD RD
MO
UNTA
IN R
D
BUCKEYE RD
LITC
HFIE
LDRD
MER
IDIA
N R
D
GERMANN RD
VI STA
NCIA
BLVD
SCO
TTSD
ALE
RD
APACHE BLVD
LAKE
PLEA
SANT
PKY
FRANKLLOYD
WRIGH
TBLVD
CLOUD RD
CRIS
MO
N R
D
MCC
LIN
TOCK
DR
T HOMPSON
PEAKPKY
DUNLAP AVE
HAPPY VALLEY RD
DEL
WEB
BBL
VD
WARNER RD
RH JOHNSON BLVD
MCD
OW
ELL
MO
UNTA
IN R
D
GREENWAY RD
24TH
ST
PEORIA AVE
FORE
ST R
D
D E ER VALLEY RD
PA LISADES B LVD
BEARDSLEY RD
SUN
R ISE
BLV
D
NORTH
VALLEYP
KY
VAL
VIST
AD
R
BROADWAY RD
RE
EMS R D
SOSS
AM
ANRD
SOSS
AM
AN R
D
94TH
ST
64TH
ST
24TH ST
HAYD
EN R
D
GILB
ERT
RD
INDIAN SCHOOL RD
MCDONALD DR
VERRA
DOW
AY
WILLIAMS FIELD RD
THOMAS RD
AVO
NDA
LEBL
VD
DESERT FOOTH ILLSPKY
32ND
ST
ALM
ASC
H
OOL
PKY
LOWER BUCKEYE RD
ARIZ
ONA
AVE
YUMA RD
MCDOWELL RD
59TH
AVE
27TH
AVE
POW
ER R
D
UNION HILLS DR
DYSA
RT R
D
PECOS RD
NORTHERN AVE
51ST
AVE
7TH
AVE
CAMELBACK RD
BELL RD
40TH
ST
CHAPARRAL RD
91ST
AVE
PECOS RD
MAR
ICO
PA R
D
BASELINE RD 19TH
AVE
CENT
RAL
AVE
67TH
AVE
DEER VALLEY RD
ELLIOT RD
48TH
ST
RIO VERDE DR
OLIVE AVE
CACTUS RD
T ATUMBL
VD
56TH
ST
SOUTHERN AVE
83RD
AVE
7TH
ST7T
H ST
SCO
TTSD
ALE
RD
RECK
ER R
DOCOTILLO RD
EMPIRE BLVD
DOUBLETREERANCH RD
24TH
ST
GLENDALE AVE
59TH
AVE
MAR
ICO
PA C
OUNT
Y
CACTUS RD
75TH
AVE
BELL RD19TH
AVE
67TH
AVE
MCDOWELL RD
VAN BUREN ST
7TH
AVE
LIND
SAY
RD
107T
H AV
E
RIGGS RD
35TH
AVE
91ST
AVE
56TH
ST RAY RD
CAMELBACK RD
111TH
AVE
99TH
AVE
VIA LI NDA
MC-85
83RD
AVE
75TH
AVE
P H O E N I XM E S A
C H A N D L E R
G I L B E R T
Q U E E N C R E E K
S A LT R I V E RP I M A - M A R I C O PA
C O M M U N I T Y
F O R TM C D O W E L L
YAVA PA I N AT I O N
F O U N TA I N H I L L S
S C O T T S D A L E
PA R A D I S E VA L L E Y
G I L A R I V E R C O M M U N I T Y
T O L L E S O N
AV O N D A L EG O O DY E A R
L I T C H F I E L DPA R K
G L E N D A L E
P E O R I A
S U R P R I S E
E L M I R A G E
T E M P E
1
6
2
3
5
4
78
10
9
11
(1) Yardi Matrix, Cushman & Wakefield(2) Yardi Matrix, Federal Reserve Board, Cushman & Wakefield(3) Federal Reserve Board, Wells Fargo
(4) Yardi Matrix(5) Moody’s & U.S. Census Bureau
1 Ahwatukee2 Central Phoenix3 Chandler/Queen Creek
4 East Phoenix5 Glendale/West Valley 6 Mesa/Gilbert
7 Northeast Valley8 Northwest Valley9 Scottsdale
10 Tempe11 West Phoenix
cushmanwakefield.com I 4
Cushman & Wakefield2555 E Camelback Road Suite 400 Phoenix, AZ 85016 cushmanwakefield.com
For more information, contact:Ronan McNultyAssociate DirectorTel: +1 602 224 4448 Fax: +1 602 253 [email protected]
About Cushman & WakefieldCushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 51,000 employees in 400 offices and 70 countries. In 2018, the firm had revenue of $8.2 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
©2019 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources believed to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
