Phoenix’s weak apartment rent growth spreads across the quality spectrum

Article originally posted on CoStar on August 13, 2025

The Phoenix multifamily market is navigating another year of underwhelming rent growth.

The average asking rent at Valley apartment buildings decreased 0.5% in July, the worst monthly performance since October 2024. Last month’s result marked the sixth-straight month of rent losses, bringing the year-to-date decline to 1%.

For comparison, Phoenix rents rose 0.3% during the opening seven months of 2024, before steep losses in the back half of the year led to negative annual rent growth of 1.6% for 2024.

Sluggish rent growth is due to an upswing in construction over the past few years, which has driven marketwide vacancy to a decade-high. Increased competition from new supply has forced many operators and owners to lower rents and increase concessions to lure prospective tenants.

While the Valley has been contending with negative annual rent growth since the start of 2023, the workforce housing segment has been somewhat insulated from supply-side pressure. The bulk of completions over the past few years were luxury properties targeting the top of the renter pool, which do not directly compete with many lower-tier properties. Rent growth for one- and two-star properties was mostly flat in 2023 and 2024, declining less than half a percentage point each year.

So far this year, however, this dynamic has shifted.

The average asking rent for one- and two-star multifamily complexes declined 0.9% in the opening seven months of 2025, matching the performance seen among luxury properties. The middle-priced three-star segment was a relative underperformer, recording a year-to-date decline of 1.2%.

Moving forward, persistently elevated vacancy is expected to weigh on rent growth performance through the remainder of 2025 and potentially the first half of 2026. Looking beyond the near-term dislocation, the pullback in construction starts and permit issuance should allow the pressure from incoming new supply to ease, supporting a recovery in vacancy and eventual reacceleration of rent growth.