Q2 2025 Phoenix Multifamily Market Report
Highlights
- Leasing activity remains resilient despite a persistent supply-demand imbalance, with Phoenix ranking among the top 10 U.S. markets for multifamily demand and standing out as a leading growth market for new development.
- While absorption has strengthened amid a wave of new deliveries, rent growth has remained negative since early 2023 as supply continues to outpace demand.
- Downtown Phoenix, Roosevelt Row, and the West Valley have emerged as key development zones, particularly for Class A and build-to-rent communities, with new deliveries expected to saturate the market well into 2026.
By the Numbers
- Sales Volume: $1.5B
- Cap Rate: 4.9%
- Market Sale Price Per Unit: $271K
- Vacancy Rate: 12.1%
- Rent Growth: -2.6%
- Market Asking Rent Per Unit: $1,587
- Unit Under Construction: 24,187
- Unit Absorbed: 4.1K
- Unit Delivered: 4.1K | Q2 2025 | Source: CoStar Group
Demographics
- Unemployment: 3.5%
- Current Population:5,247,144
- Households: 1,994,343
- Median Household Income:$89,678
Market Performance
An oversupplied market continues to weigh on overall performance across most property classes, despite solid renter demand. Overall vacancy—including newly delivered properties and those in lease-up—has climbed to 12.0% and is expected to drift higher as additional supply hits the market. Concessions have become widespread, with over 50% of communities offering some form of discount. Properties in lease-up are typically granting six to eight weeks of free rent, and this level of incentive usage is likely to persist through the remainder of the year.
Class segmentation continues to shape market dynamics. Class A properties have seen the sharpest declines, with vacancy rates more than 700 basis points above their post-pandemic lows and rents down 2.7% year-over-year. Amid softening rents and heightened competition, rising operating expenses—particularly insurance, payroll, and third-party services—are compressing margins for owners and operators. Even stabilized assets are not immune, as elevated concessions and pricing pressure continue to erode revenue performance.
Market Asking Rent per Unit, Vacancy, and Rent Growth
Source: CoStar Group Inc.
Under Construction Properties
Phoenix faces ongoing supply pressure with 23,000 units delivered in the past year and 24,000 more underway, equal to 5.7% of inventory. Downtown, especially Roosevelt Row, is a hotspot for luxury projects like the 28-story PALMtower. Build-to-rent activity is also strong in the West Valley. Though starts are down 40% from 2023, new supply will continue to weigh on the market through 2025. More insulated areas include Chandler, Gilbert, and Old Town Scottsdale. Overall, the elevated pipeline is delaying the market’s path to stabilization.
Sales
Sales activity in Phoenix’s multifamily market is gradually stabilizing but remains below pre-pandemic norms. Over the past year, $4.0 billion in assets traded—up from the prior year, yet still about 30% below 2019 levels. Class A properties are drawing the most buyer interest, with cap rates in top-tier submarkets like Deer Valley and North Scottsdale compressing below 5%. Roughly 40% of transactions since early 2024 involve assets built within the past two years, as merchant builders lean into a build-stabilize-sell strategy to exit quickly and avoid prolonged operational pressure. Amid ongoing volatility, investors are prioritizing well-located, high-quality assets. A notable example is Goodman Real Estate’s $131 million acquisition of Spire Deer Valley at a 4.8% cap rate—highlighting continued demand for premier product even in a challenged market.
Sale Volume and Market Sale Price Per Unit
Source: CoStar Group Inc.
12-Month Market Leaders: Top Five Performing Submarkets
