Q1 2025 Phoenix Multifamily Market Report
Key Findings
- A multi-decade high wave of development is overshadowing a robust leasing image, resulting in rising vacancies and negative rent increases.
- 23,000 units are under development, accounting for 5.5% of existing inventory. Phoenix has the sixth most aggressively built apartment market in the country, based on this share.
- As a result of the recent construction surge, overall vacancy has climbed to 11.9%, including newly built properties and those under lease. The rate is expected to grow further this year as additional supply becomes available.
By the Numbers
- Sales Volume: $499M
- Average Sale Price Per Unit: $267K
- Cap Rate: 4.9%
- Vacancy Rate: 11.9%
- Rent Growth: (2.1%)
- Average Market Asking Rent Per Unit: $1.6K
- Units Under Construction: 23K
- Units Delivered: 5.1K
- Units Absorbed: 4.8K | Q1 2025 | Source: CoStar Group
Phoenix Demographics
- Unemployment Rate: 3.5%
- Current Population: 5,232,369
- Households: 1,988,238
- Median Household Income: $89,048
Phoenix is a high-growth market in the Southwestern United States, known for its favorable demographic trends, low cost of living, pleasant weather, and business-friendly government. Maricopa County, the country’s fourth-largest county, accounts for over 90% of the metropolitan statistical area’s population and is frequently ranked as one of the nation’s fastest growing counties. Strong demographic momentum in Maricopa, along with exponential growth in neighboring Pinal County, propelled Phoenix to sixth place in population gains, according to the most current U.S. Census Bureau data. With the influx of approximately 85,000 residents, the Valley of the Sun surpassed other high-growth SunBelt metros such as Orlando, Atlanta, and Austin.
Market Performance
Over the last 12 months, the Valley has reported 18,000 units of net absorption, above the pre-COVID five-year annual average of 7,200. This demand figure places Phoenix among the top ten demand markets in the country. Although demand has increased, the increase construction remains a significant impediment. Increased vacancy and the influx of building have fueled competition. Annual rent growth remains negative since early 2023, and concessions have increased. Potential renters can expect six to eight weeks of free rent at leased properties, and concessions are likely to be widely used throughout the year.
Looking ahead, a drop in construction starts predicts that supply pressures will ease by 2026, enabling a recovery. The surge in vacancy has showed signs of leveling off, and occupancy in stabilized communities has been stable for more than 18 months. Nonetheless, a significant amount of excess inventory remains to be worked through, suggesting that another year of negative rent growth is inevitable.
Construction
The affect of the current construction pipeline will be prominent through 2025, and possibly beyond. Approximately 23,000 units are under development, accounting for 5.5% of existing inventory. Downtown Phoenix and Tempe have been the primary receivers of new developments, accounting for roughly a quarter of the current pipeline.
Sales
The Phoenix multifamily market continues to see low investment volume, however there are some hints of improvement. In April 2025, a private investor paid $107.5 million ($532,200 per unit) for Soltra at Kierland. The developer and seller, completed the 202-unit mid-rise in 2024, just north of Kierland Commons and Scottsdale Quarter, two of the Valley’s highest-end shopping locations.
