Phoenix Multifamily: It Isn't All About Millennials

In Phoenix multifamily, these are the best of times and the...no, not the worst of times. All of the market's fundamentals are in good shape, and as long as job growth continues, so will the demand for apartments, whose supply isn't growing as fast as demand. That was a main takeaway at our Phoenix Mixed-Use & Multifamily Forum at the Grand Sheraton Phoenix.

Axiometrics VP Claudine Zachara kicked off the event with opening remarks, telling the audience that as recently as 2013, the Phoenix multifamily market was "under the radar."

Now the market is explosive, sustained by robust job growth—about 70,000 new jobs this year, for instance. Occupancy rates are back to 2006 levels, 95% to 96%, and rents are at an all-time high and still growing. The market might level off a little by 2018, she posited, but the underlying fundamentals aren't going to change, and supply isn't going to outrace demand.

Downtown Phoenix has a pull now, more than it ever has, for apartment dwellers, our speakers pointed out. Downtown has jobs, but the pull involves more than that, it also includes ASU, which is a fast-growing university, and the fact that Downtown is considered cooler than it used to be. Light rail is a factor too. And it isn't just for young people—older people are moving back from outlying areas to take advantage of big-city life, though it still has something of a small-town feel.

Snapped: Polaris Pacific partner Paul Zeger, Davis Enterprises partner Mark Davis, ASU director, development Patrick Panetta, Colliers International research director Pete O'Neil, 29th Street Capital VP Dusty Eddy, and CBRE FVP Jeff Seaman, who moderated.

Downtown's sizzling, of course, but there's continued demand for apartments in most other area markets, our speakers said. Because of all the product that's recently been added, there seemed to be a temporary soft spot in Tempe, but even that's expected to strengthen in the longer term. Interestingly, it isn't all Millennials who are coming to Phoenix to live—in-migration is a major driver of demand—but a wider demographic, all coming for the same sorts of things, jobs and quality of life.

Shown are Boston Properties principal Scott Fisher, Fore partner Jonathan Cornelius, Weitz Co EVP Mike Bontrager, Kephart principal Bryce Hall, Lennar division president Scott Johnson, and Laron Turley, who also moderated.

Will single-family homes pose increasing competition to rental housing in the near future? That's been the case in previous cycles, the panelists noted, especially as the local economy has recovered.

But now there seems to be a paradigm shift—or at least a shift in the mindset among the rising generation—that means they aren't quite so eager to move into a house. People are more open to apartments, and more willing to pay a little more for them. That's more good news for the Phoenix market.