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Leasing Competition Slows Rent Growth in the Phoenix Apartment Market

(March 29, 2000) — Renters signing new leases at metropolitan Phoenix apartment communities are getting some of the nation’s best bargains, according to M/PF Research’s Phoenix Apartment Report. Rents at existing apartment properties in Phoenix climbed just 1.9 percent during the past year, less than half the U.S. average growth rate of 4.7 percent. These figures reflect same-store rent change, measuring rates in the same projects as of year-end 1998 and again at year-end 1999.

“Rent growth in Phoenix was cut in half during the past year,” said G. Ronald Witten, M/PF Research president. “Rent increases were limited particularly in the market’s top tier of apartment product. The fact that new units were delivered faster than the apartments could finish lease-up constrained rent growth at the best properties. Also, Class A apartments continued to face significant competition from the single-family home sector. Phoenix ranked as the nation’s #2 market for single-family home starts during 1999, behind only Atlanta.”

Phoenix apartment demand in 1999 registered at a healthy 6,020 units. Those net move-ins more than doubled the 1998 absorption level. However, 1999 demand fell short of the 8,297 units completed.

With new supply topping demand in 1999, year-end occupancy in the Phoenix area dipped 0.7 points to 94.0 percent. For comparison, the nation’s investment-grade apartment stock was 95.1 percent occupied at the end of 1999.

“While the Phoenix apartment market performance looks relatively weak compared to the national average, competitive leasing conditions also are seen in several other metros that have added new product at a fast pace,” said Witten. “Dallas and Orlando, for example, post similar rent growth and occupancy rates, and Phoenix is outachieving Houston and Seattle. Among cities with especially substantial volumes of new supply in the past year, only Atlanta and Washington, D.C. are demonstrating strong momentum.”

Phoenix Apartment Market Profile
4th Quarter 1999
Annual Employment Growth 64,000 jobs
Annual Apartment Completions 8,297 units
Annual Apartment Demand 6,020 units
Average Occupancy
  Change in Past Year
94.0 percent
-0.7 points
Average Quoted Rent
  Change in Same-Store Rents
$664 per month
1.9 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 10 submarkets.

Since 1961, M/PF Research has been the trusted national expert in apartment market research. 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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