Phoenix’s multifamily market faced rent and vacancy pressures in Q3 2025, as the metro navigates a historic wave of construction keeping supply ahead of demand. The Valley recorded 4.6K units of absorption throughout the quarter with 17,000 absorbed over the past year, providing evidence that renter demand remains robust and well-supported by strong demographics, despite overwhelming supply. This imbalance, however, has fueled further rent declines, with average asking rents falling 2.8% year-over-year to $1,600 per unit, extending a two-year stretch of negative rent growth. As construction begins to moderate, the market appears to be approaching an inflection point. The combination of steady demand and slowing supply could potentially initiate a tightening in vacancies and gradual recovery in rent performance through 2026.

 

Key Findings

• Absorption over the past year was more than double the pre-pandemic average. However, this picture of resilient demand in the metro is being overshadowed by a multi-decade high wave of construction, keeping vacancies elevated and rent growth negative.
• Phoenix’s share of under construction units, representing 4.9% of existing inventory, ranks the metro as the nation’s sixth most aggressively built apartment market.
• Despite vacancy and rent growth pressures, pricing resilience signals investor confidence in Phoenix’s long-term demand fundamentals, specifically the metro’s strong absorption and population growth.

 

Phoenix Multifamily Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Phoenix Demographics

Source: CoStar Group, Inc.

• Unemployment Rate: 3.7%
• Current Population: 5,262,290
• Households: 2,000,676
• Median Household Income: $90,033

 

Phoenix named one of the top 10 best U.S. cities for corporate headquarters

January 2025 | Source: Visit Phoenix

 

Phoenix anchors the Southwestern U.S. as a high-growth economic hub characterized by strong population gains, business-friendly policies, and strategic access to California and Mexico. Maricopa County, home to 90% of the metro’s residents, consistently ranks among the nation’s fastest-growing areas, driving sustained housing demand. Industrial expansion continues to reshape the regional economy, led by TSMC’s $100 billion semiconductor investment and major logistics developments. Supporting this growth, Arizona State University (ASU), the nation’s largest public university, supplies a robust talent pipeline through its four campuses, including 56,600 students in Tempe, strengthening the region’s labor force and innovation ecosystem. Together, these dynamics underpin Phoenix’s expanding economic base and its strong fundamentals for multifamily housing demand.

 

Population, Labor Force, & Income Growth

Source: CoStar Group, Inc.

 

Phoenix Multifamily Construction

Construction activity in Phoenix’s multifamily market remained elevated in Q3 2025, with 6.5K units delivered during the quarter and 22.1K units still under construction, equating to roughly 5% of existing inventory. Although this marks a 40% decline from the mid-2023 peak, the metro remains one of the nation’s most aggressively built apartment markets. The ongoing supply surge continues to outpace absorption, with 4.6K units absorbed and 6.5K units delivered in Q3 2025. Development remains concentrated in Downtown Phoenix and the fast-growing West Valley, where luxury high-rises and build-to-rent projects dominate new supply. A slowdown in new starts, however, signals a near-term easing of supply pressure, setting the stage for gradual market stabilization by 2026.

 

Units Construction Starts

Source: CoStar Group, Inc.

 

Units Under Construction

Source: CoStar Group, Inc.

 

 Phoenix Multifamily Sales

Investment activity in Phoenix’s multifamily market gained moderate traction in Q3 2025, with $1.4 billion in assets trading hands as investors selectively re-entered the market, with deals largely concentrated in newly delivered assets. Pricing averaged $269,000 per unit, and cap rates held steady around 4.8%, with premier Class A properties in sought-after submarkets like North Scottsdale and Eastmark trading near or slightly below that threshold. Although overall transaction volume remains below pre-pandemic norms, the uptick in Q3 signals renewed confidence in Phoenix’s long-term fundamentals and the expectation that current pricing levels present attractive entry points for investors.

 

Phoenix Multifamily Sales Volume

Source: CoStar Group, Inc.

 

By the Numbers

Source: CoStar Group, Inc.

• Sales Volume: $1.4B
• Price Per Unit: $269K
• Cap Rate: 4.9%
• Vacancy Rate: 12.4%
• Rent Growth: (2.8%)
• Asking Rent Per Unit: $1.6K
• Under Construction: 22.1K units
• Delivered: 6.5K units
• Absorbed: 4.6K units