Phoenix apartment rent losses compound in August

Article originally posted on CoStar on September 10, 2025

The Phoenix multifamily market is in a persistent state of fundamental imbalance, keeping vacancy elevated and rents on the decline.

The average asking rent at Valley apartment properties decreased 0.5% in August, matching the decline in July and marking the seventh-consecutive month with flat or negative rent movement.

Last month’s underwhelming performance brings the year-to-date rent change to negative 1.4%, a meaningful weakening compared to 2023 and 2024, which both saw rents stay essentially flat in the opening eight months of the year.

While aggregate market-level demand figures have remained robust over the past two years, the surge in supply during that time was even greater, spreading renter demand across a wider inventory of properties and sustaining downward pressure on rents.

In the 24-month period ending in the second quarter of 2025, Phoenix recorded nearly 32,000 units of positive net absorption, well outpacing the nearly 18,000 units of cumulative demand in 2018 and 2019. Net absorption is a key demand metric that measures the change in occupied stock.

At the same time, builders completed about 45,000 net new apartment units. As a result, the pace of supply additions outstripped the pace of demand formation by about 13,000 units, meaning there are about 13,000 more vacant units today compared to two years ago.

As the inventory of vacant units competing for prospective tenants continues to grow in Phoenix, market forces result in an environment of declining rent levels, increased concession usage and choosier renters. Put another way, a standard principle in economics is that prices tend to fall when supply exceeds demand, a phenomenon that has manifested in today’s multifamily market.

The submarkets and quality segments where these imbalances are especially acute have led to a corresponding underperformance.

For example, the South West and North West Valley submarkets have been among the primary recipients of the multidecade-high wave of supply over the past few years, and the change in vacancy and rent growth has been more extreme here.

Conversely, the decline in occupancy and rents in places like Old Town Scottsdale and North Scottsdale has been more moderate.

Moving forward, the easing construction pipeline should provide supply-side relief by the second half of 2026 or 2027, supporting a recovery in property fundamentals.

Over the near term, however, elevated supply pressure will likely keep rent growth negative in 2025, and recent performance is trending toward this year seeing rent declines accelerate compared to 2024.