Phoenix - Growing Renter Pool Fueling Investment Activity
Asking rents reached a cyclical high in Phoenix, hitting $804 per month in the second quarter. This marked a 2.6% increase from one year ago. In addition, a handful of submarkets in the Valley posted annual rent increases of 6% or more.
Development activity is gaining momentum. Nearly 7,000 units are currently under way, up from approximately 5,600 under construction in the first quarter. Development is concentrated in low-vacancy cities in the East Valley.
Seasonal factors caused a short-term uptick in local vacancy to 6.9% in the second quarter, but the rate remains 90 basis points lower than one year ago. Despite the recent rise, approximately 80% of submarkets in the Valley have recorded year-over-year vacancy increases.
Sales activity surged in the second quarter following a slowdown in the first three months of the year. The median price in deals closed year to date is $52,000 per unit, although there is a great deal of volatility based on property age, Class and location.
To read the full Phoenix Q2 report from Colliers International click here: Phoenix Multifamily Market Report 2Q14
Tucson - Investment Activity Gains Momentum as Vacancy Continues to Dip
Sales velocity spiked in the second quarter in metro Tucson, after minimal activity in the beginning of the year. The median price in transactions closed year to date reached $40,200 per unit, the highest figure since 2008. Investors are responding to the steady improvement in the Tucson multifamily market by stepping up acquisition activity.
Looking forward, the construction sector could serve as a catalyst to the local economy. Single-family permitting has nearly doubled from lows recorded in 2011, but construction employment has only inched higher. As those permits become housing starts, local construction employment should gain momentum. This trend could also spark some acceleration in local population growth, which would support renter demand for apartments. In the aftermath of the housing bust, local population growth slowed to near zero, in part because construction workers relocated out of the metro. Going forward, population gains of 1 percent or more per year are forecast.
Multifamily vacancy in the Tucson metro area ended the second quarter at 9.1%, an improvement from 9.3% in the first quarter and down from 9.4% one year ago.
Asking rents have increased 0.9% over the past 12 months to $639 per month. The more significant increases have been recorded at both ends of the quality spectrum, with Class A and Class C asking rents each rising more than 2% year over year.
To read the full Tucson Q2 report from Colliers International click here: Tucson Multifamily Market Report 2Q14_