The multifamily outlook for 2025 is expected to be another record year for rental units opening in the Phoenix area, according to real estate data firm CBRE.
New conventional apartments plus build-to-rent (BTR) homes in the Valley topped 21,000 units in 2024, with next year expected to match or exceed that total, CBRE vice chairman Matt Pesch said. Meanwhile, renters are filling new units faster than ever before, he said, with a record-high absorption rate four quarters in a row.
“The current multifamily construction pipeline is being met with remarkable demand,” Pesch said, “and we are seeing some of the fastest lease-ups ever in certain submarkets.”
A hotbed for rental homes
Downtown Phoenix is expected to attract more high-rise additions in 2025 and 2026, while outlying suburbs will become increasingly hot areas for rental homes.
“Nationally, the epicenter of the BTR construction boom is the West Valley,” said Connor Devereux, market analytics director at CoStar Group, with about a third of all rental construction in the region trending toward single-family dwellings. Areas of the Southeast Valley, such as Queen Creek, also continue to be popular for BTR.
Demand is largely coming from families seeking extra space and privacy who are not yet in the market to buy, Devereux said, whether because prices and interest rates are currently too high for their budgets or because they are recent transplants exploring which neighborhood they ultimately want to settle in.
Multifamily investors are noticing, said Pesch: “As the difference in the cost of owning a home compared to renting has increased significantly over the last five years, so has investor interest in the BTR asset class.”
Southern Arizona growth slower, but strong
Multifamily construction in the Tucson area is also increasing, though not at the same breakneck pace as metro Phoenix, Devereux said.
Building is mostly concentrated downtown around the University of Arizona, but also in northern communities like Oro Valley, Marana and Casa Adobes, he said.
“No one would describe it as explosive, but people continue to move there,” Devereux said. “I think of Tucson as a great combination of the low cost of living of a small market, but the population base and economic engine of a midsize market.”
Rents becoming more affordable
The multifamily construction boom is helping to alleviate high housing shortages caused in part by Arizona having some of the highest population growth in the U.S.
Vacancy rates have risen quickly over the past few years and rents are broadly cooling, after post-pandemic cost spikes, Devereux said. Renters are now able to expect generous move-in deals in most areas.
Despite more apartments opening than ever before, more construction will be needed, Pesch said.
“The metro Phoenix housing base has been underbuilt for the last decade during a period of tremendous population growth,” Pesch said. “The current pipeline of apartments has slowed the region’s traditionally strong rent growth, but the new construction will not be enough to offset the long-term housing shortage in Phoenix.”
