Phoenix’s apartment boom has run into a wall of supply, while construction and operating cost pressures have yet to relent.

With thousands of units still set to deliver in 2025, developers are contending with slower rent growth and longer lease-up times coupled with continuing labor and supply chain bottlenecks, said Daniel Perez, co-founder, managing principal and CEO of architecture and development firm Perez McGee, powered by IntegralENG.

He said the supply glut in Phoenix is forcing developers to balance design with efficiency in new projects.

“We’re seeing developers rethink amenity design,” said Perez, who is also vice president of development and construction at Senior Resource Group. “We are zeroing in on what’s actually boosting resident retention and not just what will photograph well. The focus is on controlling recurring operating costs.”

Perez specializes in development, design and construction, focusing on project delivery methodologies. His services include architecture, interior, urban and sustainable design, as well as LEED certification. He will speak at Bisnow’s Multifamily Annual Conference Phoenix event on Oct. 23.

Register here to attend the BMAC event.

Bisnow caught up with him to hear about the latest multifamily design trends and how Perez McGee is helping clients navigate the market’s challenges.

Bisnow: What has changed in the Phoenix multifamily market in recent years?

Perez: The wave of supply has hit the market. In the last 12 months, the number of units being completed and delivered has risen to between 15,000 to 25,000, up from a couple thousand units a year in previous years.

The market has been slower to absorb this influx. Concessions that are being offered are rising, particularly in the luxury tier. The oversupply is localized in certain corridors, such as Tempe and downtown.

On the other side, rent growth is cooling, in contrast to the rapid increases we saw from 2021 to 2023. As a result, we’re seeing projects that would have been delivered in 2026 being put on hold until the market balances out. Reaching that balance is going to take some time.

Bisnow: How are you seeing developers adapt to these changing market conditions?

Perez: We’re seeing developers diversify into other kinds of product, senior living specifically, which has enjoyed continuous rent growth in recent years.

We are developing senior living communities, a diversification that should not be strange to other developers, understanding that the operation is key to success, as it is in multifamily.

On the multifamily side, a key part of the process is being smart about which capital expenditures to prioritize to achieve operating cost reductions. The days of tolerating HVAC, power or other system inefficiencies are over. It starts with design but extends to implementation. Owners are seeking to leverage operation tech and automation to understand not just consumption of utilities by the end users, the renters, but everything else as well.

Bisnow: What other challenges are developers dealing with right now?

Perez: Insurance premiums continue to rise. The cost of utilities, energy and water, as well as labor and maintenance, is compressing net operating income. That is making it tougher to underwrite refinancing deals.

Moreover, due to our very hot summers in Arizona, energy and water consumption have always been an issue and are becoming more so. Now there are more regulatory measures coming out to address these issues, as there should be.

Finally, labor and supply chain bottlenecks are affecting both costs and schedules. Tariffs are a major driving force, and we don’t expect any relief on those issues in the immediate future.

Bisnow: What inspired you to attend this event?

Perez: I’m excited to continue to learn more and share about the technological aspects that are coming into play in multifamily, single-family and senior living project design. There’s so much happening within architecture and engineering, as well as development and construction, regarding artificial intelligence and machine learning as it relates to monitoring operations during design and creating financial models for projects. The models are now able to pull real-time data, not just historical data. That’s exciting.

There’s also a new generation of building materials coming to market that are more flexible, more durable and easier to build with. I’m eager to hear more about them.

Bisnow: What do you hope people take away from the event?

Perez: Despite it all, I want to emphasize that the real estate industry is full of the most creative and optimistic people on earth. There will always be challenges, but I want people to remember that supply and demand will regain balance. Now is the time to be smart and plan for projects that will be well-positioned when equilibrium returns.

Register here for Bisnow’s Oct. 23 event.

This article was produced in collaboration between Perez McGee and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.