‘There’s So Much Room For Expansion’ In Phoenix's SFR Market
As rising interest rates and record-high inflation continue to lock potential homebuyers out of the single-family housing market, the need for single-family rentals is rising. This is particularly true in cities like Phoenix where 40% of households are rentals.
Phoenix is one of the fastest-growing cities in the nation with a population increase of more than 11% since 2010. This population boom, paired with locals’ affinity for rentals and new jobs flooding into the area is further driving the need for SFRs.
“I think Phoenix will continue to lead the nation in the SFR market,” Catamount Constructors Denver Division President Mark Barton said. “Industrial projects continue to move the needle in the city, and workers at these facilities need to have somewhere to live. Phoenix has the land and industry, but it doesn’t have the bedrooms really to support its future workforce.”
Catamount Constructors is a 100% employee-owned, general contracting and construction management company with offices in Colorado, Florida, Georgia and Texas. Since its founding in 1997, Catamount has completed more than 3,000 construction projects.
Barton will be speaking at Bisnow’s Phoenix Single-Family Rental & Build To Rent Conference, where CRE leaders will be discussing the rise and demand for SFR and BTR communities, on May 2. Register here.
Bisnow spoke with Barton to find out more about the Phoenix SFR market — what trends he is seeing, how things have shifted in the current market and where it is headed in the future.
Bisnow: Can you tell us about the growth that the Phoenix area has seen in the single-family rental market, and how economic factors such as high interest rates and inflation have impacted the market’s growth?
Barton: Phoenix is a unique market where build-to-rent and single-family for-rent properties are widely popular because there’s a huge land sprawl. The city has flexibility to grow, especially into the West Valley and south of the city. There’s so much room for expansion that it really lends itself well to the rental market.
When we look at the economy in general, factors like high interest rates and inflation affect the "for sale" product a lot more than they affect the built-to-rent sector. These factors can potentially drive a new homebuyer to really be pushed out of the market. The SFR market gives them an opportunity to have their own four walls and a backyard without the struggle that a down payment brings upon the buyer.
Bisnow: What are the SFR/build-to-rent trends you’re seeing in this market?
Barton: When you look at SFR products that were first to the market in Phoenix, the homes were typically smaller ranch houses, or deconstructed multifamily as we like to call it. These are one-bedroom, two-bedroom and three-bedroom apartment units spread out on land.
What we're seeing now is a lot more creativity with the style of housing. There are more townhomes, garden-style apartments and carriage-style homes. Made with an "age in place" philosophy, the idea is that if a young, single professional wants a one-bedroom apartment, they can then grow into a home within the same neighborhood, without having to move across the Valley.
Bisnow: Can you explain Catamount’s approach to pre-construction when it comes to SFR?
Barton: Catamount provides an experience for our clients that's unique in this marketplace. There's a lot of custom-home builders that really don't bring a level of sophistication that our background in multifamily brings. Catamount has a small feel like a homebuilder, but we have the sophistication of a multifamily builder with national buying power and national subcontract relationships. We also have staff that have extensive experience in developing single-family for-rent and build-to-rent products.
Another big piece of the pre-construction equation is dealing with the city and the authorities that have jurisdiction. Phoenix is unique because it’s an older city in the SFR and BTR markets, so you don't have to teach the city as much as we have to in other parts of the country about these communities.
Bisnow: How does Catamount assist its clients with SFR projects?
Barton: I start with steps as simple as a napkin sketch to working with our clients by playing with the numbers and densities on a project.
Recently, it's been a lot about site location. We’ve been asking ourselves, "How do we help our clients pick the right sites?" Typically, we look at the site’s topography and different things that you don't spend money on in the site development, especially with tightening construction costs and increasing capital costs from lenders.
We start there and work with clients that are fully designed and bidding the work. We still provide that level of expertise to help that client through the process with the city and the authorities, no matter which stage they may be in when they come to us. At the end of the day, it's about the customer experience.
Bisnow: Where do you see the Phoenix SFR market headed this year and beyond? What market trends will remain dominant in the near future?
Barton: I think Phoenix will continue to lead the nation in the SFR market. We're also going to see these developments become more creative when it comes to density and style of housing. The market will not get to what traditional single-family homes are, but you're going to see more complexity to the structures built so they look more inviting than the past, including more townhomes, carriage-style homes and ranch homes.
Phoenix’s labor market, materials and supply chain issues are in a much better spot compared to the rest of the country. I think that lends itself to be a really good market for this year, and probably the next two or three.
Catamount has completed over $400M in single-family for-rent and build-to-rent projects for clients across the country, totaling over 2M SF.
This article was produced in collaboration between Catamount Constructors and Studio B. Bisnow news staff was not involved in the production of this content.
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