What happened to downtown Phoenix? Once affordable, rents are now soaring. Here’s why

Downtown Phoenix has gone from being an affordable area with only a few upscale apartments to one of the most expensive places to rent in the Valley in less than 20 years.

The area has drawn more new high-cost apartment high rises than any other part of metro Phoenix, and many more are planned.

Rent for a one-bedroom in The Stewart tower near Central Avenue and Roosevelt Street can top $2,000. And the monthly cost for a three-bedroom apartment in a high rise at 700 N. 4th Street is listed at more than $3,500.

And rent for a two-bedroom in the Portland Broadstone midrise at Third and Portland streets can be more than $2,800, according to Apartments.com.

Metro Phoenix led the nation for rent increases last year with a 30% jump.

A growing number of renters who want to live close to jobs or Arizona State University in downtown Phoenix are getting priced out and now face longer commutes.

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Investors are paying top dollar for new and old apartment complexes in the area, and developers are paying record prices for land to build new rentals.

“Downtown Phoenix is starting to compete with some of the hottest submarkets in the Valley for development and rent growth,” said Drew Ricciardi, research manager at Phoenix-based ABI Multifamily. “It is clear multifamily developers are targeting downtown Phoenix when you see the large concentration of multifamily units under construction in the area.”

He said developers can build more high-rise apartments in the area with less pushback and restrictions than other parts of metro Phoenix.

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Can’t afford downtown anymore
Camille Beck rented a studio in an older downtown Phoenix complex to be near her job at a law firm when she moved to the Valley five years ago.

She could walk to work and was thrilled when a Fry’s Food Store opened in 2019.

But last summer, her rent went up almost $300 a month. She moved to north Phoenix to find a more affordable apartment. Her commute went from a 10-minute walk to a 30-minute drive.

The average apartment rent in downtown Phoenix hit $2,080 at the end of 2021, according to ABI. That compares to typical rent of $1,627 for all of metro Phoenix.

Building boom in Phoenix’s core
More than 3,000 apartments have gone up in downtown Phoenix during the past five years.

And almost 96% of the area’s rentals are leased, according to the real estate brokerage Colliers.

During the past year, multifamily construction has slowed in the area like it has across the Valley due to labor and materials shortages as well as the rising “not in my backyard” sentiment.

Last year, 332 apartment units went up in downtown Phoenix.

But 4,572 apartments in almost 20 complexes are underway or planned in the area.

Earlier this year, construction started on a new 28-story tower that will have 352 apartments. The project, PALMtower, is going up at 4th and Van Buren streets.

North American Development Group paid more than $4 million for the new apartment site, which is smaller than an acre.

Investors are buying many of the complexes quickly after they are built.

The Aspire Fillmore apartments at 4th Avenue and Fillmore Street were built and sold last year for $128.8 million. That deal breaks down to $610,170 a unit, which is more than double the average price for metro Phoenix apartment sales.

Downtown Phoenix’s evolution
In the early 1990s, downtown Phoenix was like a ghost town at night and on weekends.

Workers in the area jumped in their cars and left at quitting time. There were few places to live in Phoenix’s core and little shopping or restaurants to keep people around after work.

The thriving downtown Phoenix of the 1960s had been left barren by the exodus to Valley suburbs in the 1970s.

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Downtown Phoenix had the cheapest parking of any major city in the early 1990s because so many vacant dirt lots were in the area.

But since 2005, $6.76 billion has been invested in the redevelopment of the area, according to Downtown Phoenix Inc. That includes ASU’s large footprint.

“Downtown Phoenix has grown up,” said Thomas Brophy, research director at Colliers.

He said the evolution of the downtown is transforming Phoenix from a secondary market to a gateway market that is considered a top tier area for workers, residents and investors.

Reach the reporter at Catherine.Reagor@arizonarepublic.com or 602-444-8040. Follow her on Twitter @Catherinereagor.

SOURCE: https://www.azcentral.com/story/money/real-estate/catherine-reagor/2022/03/20/why-rents-soaring-once-affordable-downtown-phoenix/7062775001/

AUTHOR: Catherine Reagor

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