Phoenix apartment demand hits record high in the first half of 2026

Article originally posted on CoStar on August 18, 2026

Net absorption outpaces completions, causing vacancy to finally inflect

The Phoenix multifamily market recorded its strongest first half of demand on record in 2026.

Net absorption, a key demand metric that measures the change in occupied stock, totaled 13,300 units in the opening two quarters of 2026, surpassing the previous first-half high of 9,500 units set in 2021 and marking a 68% increase from the first half of 2025.

The acceleration came amid an ongoing drawdown of new supply additions and may signal a point of inflection for Phoenix’s apartment market. Developers completed roughly 9,000 units during the first half of 2026, down 9% on a year-over-year basis. As a result, net absorption exceeded completions for the first time since 2021, allowing market conditions to improve after several years of supply-driven vacancy increases.

Market vacancy declined to 11.3% in the second quarter, down from 12.6% at the end of 2025. Additionally, the pace of rent growth, while still negative on an annual basis, is outperforming the same time as last year, signaling that renter demand is beginning to catch up with the unprecedented wave of construction that reshaped the market over the past several years.

Phoenix ranked third nationally for absolute apartment demand in the first half of 2026, trailing only Dallas-Fort Worth and New York. The metropolitan area also ranked third among major U.S. markets when measured relative to inventory, with absorption equivalent to 3% of existing apartment stock. Only Austin, Texas, and Charleston, South Carolina, outperformed the Valley.

Several factors have supported the acceleration. The addition of tens of thousands of new units has expanded housing options and created capacity for demand to be realized. At the same time, apartment rents have declined for more than three years while wage and income growth have remained positive, improving affordability for renters.

Longer-term demographic and economic tailwinds remain intact. Phoenix continues to rank among the top population growth markets in the country. The Valley attracts residents from higher-cost coastal markets, particularly California, while benefiting from a growing and increasingly diversified economy. Major corporate investments, including Taiwan Semiconductor Manufacturing Co.’s expanded $265 billion commitment in north Phoenix, have reinforced job growth prospects. Combined with a favorable business climate and year-round warm weather, those factors continue to support strong underlying housing demand across the region.

Looking ahead, with apartment construction expected to moderate further and demand remaining elevated, market conditions appear increasingly favorable for continued vacancy compression and an eventual return to positive rent growth.