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Phoenix Apartment Occupancy at Seasonal High, But Rent Growth Has Flattened

(April 11, 2001) — Phoenix apartment occupancy reached 95.9 percent in March 2001, according to the latest edition of M/PF Research’s Phoenix Apartment Report. The Valley’s occupancy rate, which normally registers seasonal peaks when “snowbird” renters are in town during 4th and 1st quarters, now is at its highest point since late 1997. Today’s occupancy rate tops the early 2000 performance by 2.1 points.

Despite improved occupancy, a competitive leasing environment still is evident in the Phoenix apartment market’s rental rate trends. The annual rent growth pace, measured on a same-store basis and thus precluding any impact from sample variation, is lukewarm at just 1.5 percent. This rent growth level falls well below general consumer price inflation and, in fact, is one of the slower rent growth performances seen nationwide.

“Rent concessions seem to come and go in Phoenix, producing one of the more volatile rent growth patterns seen across the country during the past year or so,” said Greg Willett, M/PF’s director of research products. “Rent specials such as two weeks of free rent recently have once again become commonplace throughout metro Phoenix, particularly in neighborhoods adding significant amounts of new apartment supply. These concessions have essentially flattened rent production in most neighborhoods.”

Monthly rents in the Phoenix area average $693, with rates reaching a norm of $859 at communities built during the past decade.

Demand for apartments in Phoenix registered at 1,470 units in the January-March time frame, bringing absorption over the past 12 months to 12,130 apartments. This demand well surpassed completions of 554 units in projects finished during the 1st quarter and 7,658 units in communities delivered over the course of the past year. With demand at more than 1,100 units, Chandler/South Phoenix ranked as the metro’s #1 pocket of net leasing in the year-ending 1st quarter. Demand for roughly 800 apartments was seen during the past year across three neighborhoods: Central Phoenix, Far North Phoenix and Sun City/North Glendale/North Peoria.

“Substantial ongoing building activity suggests that Phoenix’s apartment leasing environment should remain competitive in the near term,” Willett said.

More than 9,800 units were under construction at the end of 1st quarter. The greatest concentrations of new product in the pipeline include more than 2,200 units under way in Chandler/South Phoenix and some 1,400 units in the Intown area and likewise in Mesa.

Phoenix Apartment Market Profile
1st Quarter 2001
Annual Employment Growth 56,000 jobs
Annual Apartment Completions 7,658 units
Annual Apartment Demand 12,130 units
Average Occupancy
  Change in Past Year
95.9 percent
2.1 point
Average Quoted Rent
  Change in Same-Store Rents
$693 per month
1.5 percent

M/PF’s Phoenix Apartment Report is a quarterly report that includes data and analysis addressing the local economy and trends in apartment demand, supply, occupancy and rents. Information is summarized on the metro level and detailed for 14 submarkets.

Founded in 1961, M/PF Research is the trusted national expert in apartment market research, each quarter conducting primary research on property performance in more than 50 U.S. metropolitan markets. M/PF is retained by investors, developers, owners and lenders to prepare project-specific market studies and to produce broader, strategic market selection analyses and reports. M/PF Research, located in Carrollton, Texas, is a wholly owned subsidiary of RealPage, Inc., a leading provider of property management software and web services.

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