WESTERN SNAPSHOT, JULY 2009
Phoenix Multifamily Market
1. MARKET MOVE
Unlike the rest of Maricopa County, student housing finds itself in high demand. As Arizona State University continues to grow, the need for student housing persists, and North Tempe bucks the market trend with almost 1,000 units coming online in 2009 and another 1,200 units planned. (Included in these units are eight different developers.) The recently completed Alta Phoenix Lofts is the only luxury loft apartments in the center of downtown Phoenix, meeting the student housing need right where it’s at. Developed by Wood Partners, the $55 million, 332-unit lofts are within walking distance of the Phoenix METRO Light Rail with great views of downtown Phoenix and easy access to ASU and North Tempe.
2. MARKET MEASURE
Indicators to observe include the direction of Fannie and Freddie rates, net migration and job formation. Fannie Mae rates determine the direction of capitalization rates, and cap rates need to rise before buyers will start to see an increase in multifamily property values. If job growth begins to increase, thus in turn increasing net in-migration, vacancy will go down and we will find our market returning to normalcy, as history has proved. All of the above plays a major role in the direction of the multifamily market and are all market measures to be watched.
It should also be noted that in Maricopa County more than 550,000 10- to 19-year-olds will turn 20 in the next 10 years, and many retirees, afraid after this cycle, will rent in nice locations to keep their money liquid rather than tie up their money in single-family homes.
3. THE MARK OF A MARKET
Metropolitan Phoenix’s proximity to California is huge. Because California is experiencing problems with increased debt and tax structure, Maricopa County, and specifically metropolitan Phoenix, will see increases in in-migration and overall population growth. More than 8,000 people a day turn 62, and these Baby Boomers want out of the cold weather and into warm, lower cost-of-living areas.
— Brad Goff is a principal and David Lord is a senior vice president for Apartment Realty Advisors in Phoenix.
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