The national multifamily market maintains its momentum after another quarter of declining vacancy, steady absorption gains, and rising rents. All of these positive indicators continue to fuel investment activity as 2016 is on pace to exceed last year’s peak volume. Many of the national themes driving the multifamily market are even more pronounced in Phoenix as it leads the nation in many aspects. Below are highlights from JLL’s Q3 Multifamily Investment Outlook.
Multifamily “follows the jobs” across diverse range of states and metro areas
- Phoenix has consistently outperformed the nation in job growth over the last several years.
- 12-month job growth as of September 2016 came in at 2.4 percent with unemployment falling to 4.8 percent.
- Phoenix has a track record of consistently adding 50,000 – 70,000 jobs a year since the recession and as such, has seen strong demand for multifamily units.
- Despite the active construction pipeline in the Valley, multifamily vacancy has remained at record low levels as demand keeps up with new deliveries.
Annual rent growth tops 4.0 percent yet again
- Phoenix ranks fourth among more than 30 large Metros in the country for 12-month rent growth, just behind Seattle, Portland, and Sacramento and well ahead of the national average.
- While strong tech markets such as San Francisco and Oakland have fallen back from their peak growth, Phoenix has jumped to the front of the group exceeding expectations.
- As demand continues to keep up with new construction and vacancy remains tight, rents are expected to maintain their growth trajectory over the forecast horizon.
Multifamily sales maintain their accelerated pace, driven by secondary markets
- Secondary market activity continues to make up the largest portion of sales volume in 2016.
- The Western region specifically led the country with markets such as Phoenix, Oakland, and Las Vegas leading the way.
- Investors have become more selective as the current cycle matures and are beginning to explore additional options to the current record low cap rates in primary markets.
- Overall investor appetite for multifamily assets appears insatiable across many secondary markets.
Click here to read more about how secondary markets like Phoenix are impacting the national multifamily sector in JLL’s Q3 Multifamily Investment Outlook.
About the author
John Cunningham is an Executive Vice President for JLL’s Capital Markets Group. Based in Phoenix, Arizona, John focuses on multifamily transactions throughout the Southwest and oversees a broad range of investment sales and equity procurement for multifamily developers. He is currently engaged in multifamily transactions in Arizona, Nevada, and New Mexico.