Introducing Market Reports—search the largest database of commercial real estate market reports.

Multifamily Demand Surges In Phoenix As Deliveries Slow

Multifamily demand in Phoenix outpaces new supply for the first time in two years as vacancies drop and construction activity slows.
Multifamily demand in Phoenix outpaces new supply for the first time in two years as vacancies drop and construction activity slows.
  • Net absorption in Phoenix outpaced new deliveries in Q1 2025, marking the first such occurrence in two years.
  • The vacancy rate declined to 7.1%, the first annual improvement in four years, driven by a slowdown in new inventory.
  • Despite mixed rent growth and a sharp decline in multifamily sales activity, long-term projections point to tighter vacancy and more stable fundamentals through 2028.
Key Takeaways

A Shift In Momentum

After several quarters of oversupply, Phoenix’s multifamily market is finally seeing demand catch up, as reported by GlobeSt. In Q1 2025, the metro absorbed 3,750 units—exceeding the 3,288 units delivered during the same period, per a new Northmarq report. It’s the first time demand has outpaced supply in two years.

A Slowdown That Helps

Deliveries were down 33% compared to Q1 2024, helping to ease pressure on landlords. As a result, vacancy rates dropped by 30 basis points quarter-over-quarter and 10 basis points year-over-year, settling at 7.1%. Submarkets like North Scottsdale and both North and South Tempe are seeing particular relief.

Rents And Sales Remain Uneven

While rents are showing signs of stabilization—with a 0.7% quarterly increase—they’re still down 2% year-over-year, with average asking rents at $1,556. On the investment side, multifamily sales volume hit a five-year low in Q1, down 50% from the same period last year. Class B and C assets led the few transactions that did occur, while newer properties saw limited activity.

Looking Ahead

While the current quarter brought some optimism, challenges remain. Northmarq expects new construction to resume in the coming quarters, though at a slower pace from 2026 through at least 2028. If that trend holds—and if strong multifamily demand continues—Phoenix’s vacancy rate could dip back to around 5%, signaling long-term market stabilization.

Why It Matters

This turnaround underscores a broader national trend where multifamily markets that had overheated during the pandemic construction boom are beginning to rebalance. For Phoenix, a city long viewed as a growth market, demand fundamentals appear to be catching up—though investors and developers should remain cautious as the market digests recent supply.

RECENT NEWSLETTERS
View All
Invesco Sees CRE Values Rising in 2025 Despite Tariff Turbulence
June 18, 2025
READ MORE
Q225 Burns + CRE Daily Fear and Greed Index
June 17, 2025
READ MORE
Manhattan Rents Break Records—And Could Climb Higher This Summer
June 16, 2025
READ MORE
Class A Occupancy Hits Two-Year High, But Class B Still Leads
June 13, 2025
READ MORE
Build-to-Rent Is Reshaping the Future of Multifamily Investing
Why Now Is the Smartest Time to Be in Multifamily Development
CRE Daily - No Cap

podcast

No CAP by CRE Daily

No Cap by CRE Daily is a weekly podcast offering an unfiltered look into commercial real estate’s biggest trends and influential figures.

Join 65k+
  • operators
  • developers
  • brokers
  • owners
  • landlords
  • investors
  • lenders

who start their day with CRE Daily.

The latest news and trends in commercial real estate delivered to your inbox. Get smarter about what matters in just 5-minutes or less.