Big Apartment Deals Cap Year for Phoenix’s Eastern Suburbs

Article originally posted on CoStar on December 29, 2023

The Phoenix region is ending the year with big December apartment sales, including at least two priced at $80 million or higher in the city’s eastern suburbs.

Weidner Property Management, based in Kirkland, Washington, bought the 288-unit Broadstone Dobson Ranch, built in 2022 at 1666 S. Dobson Road in Mesa, Arizona, for about $85.2 million. The seller was developer Alliance Residential of Scottsdale, Arizona, according to public filings.

Also this month, Atlanta-based developer Wood Partners sold the 248-unit Alta Cooley Station, completed this year at 2550 S. Recker Road in Gilbert, Arizona, to a private California investor for about $80 million, according to brokerage Marcus & Millichap, which represented the seller.

CoStar data and public filings also showed the closing this month on the 214-unit Elevation at the Village in Gilbert, purchased by a private Los Angeles buyer for about $66.5 million from developer Vedura Residential of Scottsdale. The property was completed in 2022 at 1935 S. Santan Village Parkway.

CoStar Market Analytics data as of Dec. 27 showed all three deals ranked among the 25 largest of the past 12 months for the overall Phoenix region based on total price. Phoenix continues to rank among the nation’s most active regions for apartment sales and development, posting $3.5 billion in multifamily sales in the past year. About a third of those deals, $1.2 billion, closed in this year’s third quarter.

The East Valley area — including Mesa, Gilbert, Chandler and Tempe — has been among the Phoenix region’s fastest growing for population, jobs and household income during the past three decades. New jobs have been drawn to the eastern Phoenix suburbs amid expansion by companies such as Intel, Meta, Apple and Google, according to a third quarter report from brokerage Cushman & Wakefield.

“With average and median household incomes of $130,000 and $101,500 respectively, Gilbert has one of the strongest demographic profiles in Arizona,” said Steve Gebing, executive managing director with Marcus & Millichap’s Institutional Property Advisors division, in a statement on the sale of Alta Cooley Station. “Gilbert, Chandler, and Mesa combined have the highest concentration of high-tech manufacturing, finance, and business services employers in the Valley.”

But Phoenix and its East Valley area have not been immune to an apartment investment slowdown, rising vacancies and slowing rent growth that occurred in several big U.S. cities during the past year. CoStar data showed multifamily deal volume during the past 12 months was down about 74% from a year earlier in the overall Phoenix region and declined nearly 80% in the East Valley. The eastern suburbs still posted about $760 million in deals during the past 12 months.

The regional apartment vacancy remains high by historical standards at 10.9%, with East Valley vacancy at 10.1%. With rising consumer sentiment, the Phoenix region is now gradually absorbing about 18,000 apartments delivered to the market during the past year, though another 34,000 are under construction.

“Though leasing showed signs of rebounding this year, it was not enough to absorb the record amount of new construction coming online, causing the Phoenix vacancy rate to move higher,” according to a recent report by Connor Devereux, director of market analytics for CoStar Group in Phoenix.