Suburban Phoenix Apartment Sale Among Region’s Priciest of Past Year

Article originally posted on CoStar on April 3, 2024

An apartment deal in Scottsdale, Arizona, is among the Phoenix region’s highest-priced transactions of the past year in a sign of investor demand for the city’s eastern suburbs.

Still, the sale price was below the prior one for the complex as Sun Belt multifamily markets experience higher vacancy rates following an influx of new units coming online.

Investment firm IMT Residential of Sherman Oaks, California, acquired the 240-unit Hadley North Scottsdale from JB Partners of South Jordan, Utah, for approximately $96 million or $400,000 per unit, according to public filings and brokers handling the deal.

CoStar and public data showed the price was below the $145 million or $604,000 per unit that JB Partners paid for the property in May 2022. But the per-unit price was still above the average $369,000 paid for North Scottsdale apartments during the past year.

Apartment supply increases over the past year in the Sun Belt have kept national rent growth to a minimum, according to a January report from Apartments.com. Supply and vacancy increases in 2023 were largely focused on the South and West, the report said, with oversupply limiting rent growth in the West to 0.4%.

Rent growth in the Midwest and Northeast, markets that largely avoided the oversupply issues seen in the Sun Belt, remained strong at roughly 2.5% year over year.

“Unlike other parts of the Valley that saw several quarters of negative absorption over the past 18 months, move-ins have been relatively steady in North Scottsdale,” Connor Devereux, director of market analytics for CoStar Group in Phoenix, said in a regional report. “Elevated supply pressure, however, has outstripped rental demand over the past few years, causing vacancy to rise from 5.0% in late 2020 to 6.8% today.”

The Phoenix region posted $3.4 billion in apartment sales during the past 12 months, down 69.4% from the prior year. The region’s apartment vacancy rate grew to 10.4% as average asking rents declined 1.8% during the past year, with many newly opened units still to be leased up.

The North Scottsdale area posted $401 million in sales in the past year, among the Phoenix region’s highest tallies, though that was down 14.1% from the prior year. North Scottsdale also has among the region’s highest asking rents, though rents declined by a relatively small 0.9% in the past year while vacancy is now lower than the regional average at 6.8%.

The recently sold property was built in 2014 on about 5.8 acres at 15509 N. Scottsdale Road, and the buyer is rebranding it as IMT North Scottsdale.

The sale marked the Phoenix region’s 11th largest apartment deal of the past year by total price, and the fourth-largest in Scottsdale. Among the region’s 20 largest sales of the past 12 months, 13 took place in eastern suburbs of Phoenix, with two in suburban Glendale to the west, according to CoStar data.

Investors were attracted to the Scottsdale property by factors including its proximity to the Loop 101/Pima freeway and locally based employers such as Mayo Clinic, American Express, Vanguard and Nationwide Insurance, according to a statement from brokerage Institutional Property Advisors, which represented the seller.

Amenities at the complex include a swimming pool, clubhouse, conference room and workstations.

The seller was represented by Steve Gebing and Cliff David of Marcus & Millichap’s Institutional Property Advisors division, who also procured the buyer.