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Follow on Google News |  Phoenix MSA Multifamily Market's Record Breaking 2016: $4.97 Billion in Apartment SalesBy: ABI Multifamily 
Multifamily Market Comparison: Phoenix v Las Vegas v San Diego v Tucson In regards to population, although growing less than the halcyon days of the 1980/90's, Phoenix MSA grew by nearly 2% to 4,565,900 in 2016. According to American City Business Journal's population analysis of the 25 largest metropolitan areas in the US, Phoenix area population growth is set to heat up and is expected to grow by 4% to 4,757,755 by the end of 2018. Phoenix Market Metrics: By the Numbers The MSA's total sales volume (10+ unit properties) increased 28%, year-over-year, to a market record, $4.97 billion across 376 total transactions with 47,233 total units sold or 14% MV (Market Velocity which is calculated by dividing number of units sold by total number of units). In fact, Phoenix's MV rate has increased nearly 34% since 2013 due to substantial investor interest in value add sales. Despite besting our 20 year new construction delivery average, 5,300 units, with 7,912 new units delivered in 2016, both average rent and occupancy increased for the MSA, by 7.8% to $955 and 0.5% to 95.6% respectively. Mesa and Glendale claimed the top spots for the MSA in rent growth at 9.9% and 9.5% respectively, followed by Phoenix at 8.3%, Tempe at 6.3% and Scottsdale at 5.6%. Although Scottsdale saw the lowest average rental rate percentage increase of the MSA, it still claims the top spot in actual average rent which at $1,241 is the highest in the region. In regards to occupancy, Tempe was #1 at 96.2% despite being #2 for unit deliveries and once again bucking analyst expectations of a projected decrease in occupancy due to increasing supply. Glendale came in at #2 with 95.8% occupancy, a 1.1% y-o-y increase, while Phoenix and Mesa were tied for #3 with both increasing 0.6% to 95.6% and 95.5% respectively. Scottsdale, the lone outlier, was the only city in the region to witness a small occupancy contraction of (0.3%) to its current 95%; due, in large part, to a 7.5% net increase in total supply. Peak Pricing? As of YE 2016, and referenced in the chart, Phoenix, overall, is approximately 3% above peak 2007 pricing and still well below San Diego's current $214,742/unit amount. 1980's built product has seen the greatest price per unit increase rising, on average, 18% above peak 2007 pricing to its current $90,384/unit. In fact, 1980's built product is the only product type to have risen above the 2007 peak. Pre-1980s built projects are second, in terms of previous peak-to-current price per unit appreciation, rising to $70,823 or (2%) below 2007's peak, 1990-99 built projects are (4%) below 2007's peak currently, $135,318 per unit, and 2000-09 built projects are (6%) below peak at $129,786 per unit. Got Land? Phoenix MSA continued to see robust year-over-year land sales volume growth rising 43% to just over $150M across 26 transactions, totaling 204.5 acres. Although total sales volume saw an increase, overall sales price per SF decreased to $30.32 as a result of developers purchasing less expensive land in the MSA's periphery, namely Chandler ($15.44/SF), Gilbert ($7.90/SF) and Mesa ($13.49/SF). Tempe saw the highest sales price per SF amount in the MSA, rising 26% y-o-y to $56.74 and followed by the City of Phoenix at $34.99 per SF. The Road Ahead As stated in our 2017 Market Forecast, it is unlikely the Fed will continue its announced interest rate increases in 2017, having stated so the previous two years with nary a hike made. Despite this assessment, 2017 should prove to be a highly volatile year especially in international markets, i.e. Europe and Asia. The EU, already in a precarious state over Brexit and the Italian Referendum, will see continued instability and uncertainty especially with both German and French elections just on the horizon. Asia, and specifically China, has and will continue to see reduced growth with various asset bubbles in danger of bursting. The net result will be continued capital flight from both regions to more stable areas in the West. Phoenix multifamily's greatest competitor, single-family home construction, although rebounding, is still far from normal. As was stated at the 2017 Belfiore Annual Housing Conference, home builders have been struggling with a whole host of issues from labor shortages, rising material costs and lack of available land, particularly in more urban core areas where people want to live. Last, and perhaps most important, home builders are facing significant competition from multifamily developers/rehabbers luring, and keeping, would be homebuyers through high-end construction finishes and access to amenities. While there is some concern about over-building, particularly among Class A multifamily properties, the reality is that Phoenix is still at a net deficit and needs more units to accommodate continued growth which, as it stands now, single-family has been unable to fill that new, net demand. The penultimate result, and barring any Black Swan events, multifamily should continue growing well into 2017/18. To view the full Phoenix MSA Multifamily Market Report YE 2016 go to: http://www.abimultifamily.com/ ABI Multifamily is the Western US's leading multifamily brokerage and advisory services firm that focuses exclusively on apartment investment transactions. End
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