Multifamily construction in Greater Phoenix returned to record level highs for completed number of units, rental rates and investment activity for the first time in over a decade.
This year marks one of the highest rates of completion of multifamily developments since 2000. It also exceeds investment activity levels not seen since 2007. In turn, rental rates rose for a seventh consecutive year, which marks a 30 percent rise since 2009.
“There has been somewhat of a pent up demand for high-end, rental housing in Arizona for the past several years,” says Tom Shelton, principal at Shelton-Cook Real Estate Services.
“The construction and delivery of single-family housing remains low and homeownership rates are at all-time lows,” he explains. “More and more people are choosing renting as a lifestyle choice – hence the robust construction of new apartments.”
New multifamily construction is largely found in three primary areas: Downtown Tempe, Downtown Scottsdale and Downtown Phoenix.
Are you starting to see a common theme?
More and more multifamily developments are popping up at infill sites in prominent downtown areas with the richest urban environments, which offer the most amenities and nearby resources for renters.
“The multifamily developments with the highest rents are in those infill entertainment corridors in downtowns,” says Tyler Anderson, vice chairman at CBRE.
These downtown submarkets are also seeing more innovation and technology companies enter those areas to target this young professional and Millennial demographic.
Anderson explains, “35-year-olds and under are the strongest renting class,” but more Baby Boomers renters that are 60-years-old or more are looking at luxury multifamily options.
The Baby Boomer generation is not considered the “typical renter” class adds Shelton.
He says, “Most people deciding to rent today prefer the mobility that renting provides, and they choose to live in an environment where maintenance of their home is minimal.”
The other big change in the multifamily market are the amenity packages being offered at new developments that focus on connecting people to people through their shared interests.
“New amenities run the gamut – high end and world class fitness facilities, resort pools and outdoor living spaces, in-unit Wi-Fi and surround sound, concierge services, dog washing stations, Uber discounts and gift cards,” explains Shelton. “Chances are if you look long enough, you’ll find most anything.”
These new buildings are at a whole new level of quality compared to traditional apartment complex of the past, adds Anderson.
Whether it’s a virtual driving range, lounge, bar, kitchen, billiards room, outdoor fire pits or big projectors to watch Sunday’s big game, these luxury multifamily developments are not holding back in terms of amenity packages.
Richard Renta, regional director of Arizona at Weidner Apartment Homes, says, “There are so many communities that have these extensive amenity packages, what is going to distinguish them from the rest is the level of service they can give renters.”
There is still a thirst for amenity driven communities with rooftops pools like @51 Phoenix Apartments near the Camelback Corridor area.
However, Renta explains, “Over the years, everything is being called a luxury community” and newer developments are starting to feature all the same amenities and options. Thus being able to provide next level service will be key for these apartment complexes, he adds.
Affordability is always a hot topic but Shelton says, “Despite escalating rents on new Class A product, the cost of living in a new apartment is still most likely less than a single-family home when you consider a mortgage, taxes, insurance, the maintenance and upkeep associated with owning a home.”
