The U.S. multifamily sector saw strong momentum at the start of 2022, with robust demographic trends underpinning record leasing activity, rent growth and investment during the first quarter, according to CBRE’s latest report. In the Mountain West region, Phoenix was No. 1 in terms of year-over-year rent increases at 15.6 percent.

Investment in the multifamily sector increased by 56% year-over-year to $63 billion in Q1 2022—the strongest first quarter on record and bringing the trailing 4-quarter total to $374 billion. Multifamily accounted for 37% of total commercial real estate investment volume in Q1 2022, followed by office at 21% and industrial at 20%.

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“Continued coastal migration is the biggest macro trend from the tenant side because, despite the solid rent growth, this region is still most affordable in the West,” said Phoenix-based Vice Chairman Matt Pesch. “It offers really good employment growth and good quality of life.”

The region was 6th among all metros for multifamily investments over the past four quarters with $17.6 billion in total volume, 125 percent higher from a year ago and accounting for 4.7 percent of the U.S. total. Phoenix was 10th in terms of completions, with a total of 9,000 new units delivered during the past four quarters. That compares with 11,000 in Greater Los Angeles.

“We have a severe undersupply of housing, and there is no clear path for changing that any time soon,” said Pesch. “The pipeline is not as high as it should be due to the labor shortage, which is the bottle neck. That’s why we will continue to see strong rent growth.”

The overall multifamily vacancy rate in the U.S. fell by 20 basis points (bps) quarter-over-quarter and 2.5 percentage points year-over-year to a record-low 2.3%. Average net effective rent increased by 15.5% year-over-year to $2,007 per month. Average rents now exceed their pre-pandemic levels in all but two of the 69 markets tracked by CBRE (San Francisco and San Jose).

New construction deliveries of 66,400 units in Q1 2022 brought the four-quarter total to 292,500—the highest amount since 1987. With more than 400,000 units currently under construction, 2022 deliveries are expected to eclipse 2021.

Read the full report here.