Is Phoenix apartment building investment overheating already?
My exec sum from the Apartment Finance Today* article Apartments Rising in Phoenix Again
- Right now, there are seven properties and 2,497 units in the market under construction and another 49 properties, totaling 15,164 units, on the way, according to Axiometrics.
- But in Phoenix you always want to know how much is too much. Some observers in the market think these projects with high rents per square foot may not meet market needs.
- I think the overall market can sustain the number of units that we’re delivering, if they are all constructed. However we’re delivering them primarily at three intersections and they’re all triple Class A brands.
It seems like if all that class A gets built it might suck all the oxygen out of the market for older class A properties, which would then effectively become class B properties and that would leave a mark on those operators… And it just dominoes down the line with existing class B being pushed down to class C. Great (hopefully) if you have a brand new class A property, not so great if you own an existing property.
My other take away is about ‘projects with high rents per square foot may not meet market needs.’ In a May post about what changing demographics means for the type and price points of future demand, the growth in the echo boomer cohort and their aging parents means that more modestly priced apartments will be more sought after. See Are we overbuilding multifamily already? Or just the wrong kind? Research from CBRE Econometrics.
*Note that the updated link is to the text only version on MFE’s website but it is the same article.
