Multifamily Developers Zero In on Downtown Phoenix

Article originally posted on CoStar on October 10, 2019

The revitalization of Downtown has brought an influx of young professionals seeking a live/work/play lifestyle that the Phoenix submarket now offers. And multifamily developers are responding.

As discussed in the accompanying video, Downtown has the most apartment units underway of any submarket in the Phoenix metropolitan area. More than 4,000 units are under construction, with the majority of rentals being the upscale, four- and five-star units.

Heightened construction activity has put upward pressures on vacancies and downward pressure on rent growth. Despite a slowdown in rent gains, rent growth in the submarket outpaced the U.S. average by a significant margin. The full construction pipeline will temper rent growth over the next several quarters.

One of the most highly anticipated projects, Block 23, is nearing completion. In addition to 330 luxury units, the development will also include a Fry’s grocery store, retail and restaurant space and office space. Another project in downtown Phoenix, X Phoenix, will debut co-housing in the market.

Landlords are not only competing with the full construction pipeline but also face competition from renovated properties. Unrelenting rent growth has forced some renters to look at mid-tier properties that have received updated finishes in midtown and uptown.