Multifamily Supply Can't Catch Demand. Here's Why.

People are moving to Phoenix in droves and they want apartments. It'll be hard for developers to keep up. That's why we're excited to present Bisnow's Phoenix Multifamily Boom event, beginning at 7:30am on Sept. 23 at the Hyatt Regency Scottsdale.

Lennar Multifamily Communities-Mountain States/Southwest division president Scott Johnson, who will be a speaker, tells us he's seeing strong absorption across the Valley in new Class-A projects, despite the fact that 2015 will probably be the year deliveries peak in this cycle. "Also, we're seeing this strong absorption while rents continue to reach new highs in the primary submarkets, which is very encouraging."

Supply will keep rising beyond this year, Scott adds, but it's not a worry: "We expect roughly 7,000 units delivered annually through 2017 and feel that the absorption will keep up with this pace." That's due to strong job growth and a demographic trend that's clearly showing a continued preference toward renting versus owning, he explains.

Fundamentals for multifamily in Phoenix are favorable now, and that will continue over the next several years, agrees MG Properties CIO Christian Garner, who will also be a speaker. "Phoenix is forecast to add jobs at a rate that outpaces most of the nation’s major markets," he notes. Population growth will swell at a rate that outpaces new supply by almost two-to-one over the next three years. Rent growth and occupancy figures should continue to improve, resulting in continued, if not accelerated, bottom-line growth.

Mark-Taylor EVP Chris Brozina, who will be a speaker, says that for maybe the first time in Phoenix history, any discussion about multifamily supply must specify the type of supply. "The difference in density has grown so stark that the cost and operating metrics almost look like different property types altogether," he explains. "The pure volume of renter demand will keep up with the pure volume of new supply, but the unanswered question is whether demand will concentrate toward ultra-high density, the way development supply has.” Pictured: the recently completed Villas at San Dorado in Oro Valley, a JV between Mark-Taylor and Kitchell Development Co.

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