Multi-family Consulting / Phoenix
Phoenix is the most oversupplied large multifamily market in the country going into 2026. Yardi Matrix had asking rents down 4.1 percent year over year through November 2025 at $1,519 average, the second worst result among the top 30 metros. Roughly 18,200 units delivered in 2025 with another 28,100 under construction, and concessions show up on more than half of listings.
The Phoenix MSA absorbed more than 60,000 units of new supply between January 2022 and November 2025. Net absorption ran around 19,000 units in 2024 per MMG Real Estate Advisors, but new deliveries outran demand for three straight years and concessions became the relief valve. Q3 2025 vacancy in Matthews data sat at 12.4 percent inclusive of lease-up, average asking rents near $1,600, and Q3 cap rates around 4.9 percent on closed trades. Colliers tracked $3.3 billion in Q3-YTD sales across roughly 60 properties at an average $270,114 per unit, and Q4 was the strongest transaction quarter since the end of 2022. Class B trade count was up nearly 70 percent year over year and Class C up more than 50 percent.
Submarket performance is split. North Scottsdale was the only Yardi-tracked submarket with positive annual rent growth heading into Q4 2025. Old Town Scottsdale, the Camelback Corridor, and Gilbert hold stabilized vacancy below the metro average with thinner pipelines. Tempe, Downtown Phoenix, Roosevelt Row, and the West Valley around Glendale, Peoria, Surprise, and Buckeye carry the largest lease-up exposure and the slowest path back to rent growth. Mesa two-bedroom rents were down close to 10 percent year over year per AZ Family reporting in late 2025, and Glendale dropped 8 to nearly 12 percent. CoStar flagged Chandler and the Camelback Corridor as the two submarkets likely to return to positive rent growth first.
The operator landscape is concentrated. Mark-Taylor is the largest owner of Class A communities in Arizona, manages 142 communities, and ranked #1 in the 2025 TALi Awards. P.B. Bell, founded in 1976, named Justin Steltenpohl CEO in January 2025. Greystar absorbed Alliance Residential's management business in 2020 and crossed one million units globally. Camden, MAA, and MEB round out the institutional set, with MAA closing a Phoenix parcel in October 2025 to start a 280-unit project in Q4.
Concessions are the headline cost of doing business. More than half of Phoenix listings carried concessions through 2025, double the 28 percent national average. Six to eight weeks free is standard on lease-up product, with two months free or 50 percent off the first four months showing up at downtown comps like The Rey. Effective rent at the property level can run 8 to 12 percent below asking once concessions are amortized.
Operating costs are climbing into the rent decline. SRP implemented a 2.4 percent rate increase in November 2025, and APS filed for a 13.99 percent net increase that adds roughly $20 per month for typical users no earlier than July 2026. Phoenix HVAC equipment runs a 10 to 15 year useful life because of cooling-season hours and 115F-plus stretches, with a three-ton condenser plus air handler at $9,500 to $12,500 installed and ductwork repair adding $1,000 to $3,000. Owners running older split systems are seeing energy bills 50 to 70 percent above a properly specified replacement.
Water is a structural overhang. Arizona takes an 18 percent reduction to its Colorado River allocation in 2026 under Tier 1 shortage, a 512,000 acre-foot cut equal to roughly 30 percent of CAP's normal supply, with most of that hitting agricultural users. The post-2026 operating criteria for Glen Canyon and Hoover Dams expire, and Phoenix is planning deeper conservation measures. The Assured Water Supply moratorium paused new for-sale subdivisions in Buckeye and Queen Creek that relied on local groundwater. ADWR approved its first Alternative Designation of Assured Water Supply for EPCOR in October 2025, opening capacity for roughly 60,000 new homes in Buckeye and Surprise, and also approved Buckeye's plan to import 5,900 acre-feet annually from the Harquahala Valley basin. Property tax timing matters in Maricopa County. Assessor valuations land each year, with LIHTC income election petitions due before September 1 of the prior year, and full cash and limited property value mechanics run independent of operating performance.
The areas below show up in most Phoenix engagements. Scope is set per client based on what is actually needed.
We work concession structure on lease-up and stabilized comps, including renewal versus new lease pricing in Tempe, Downtown Phoenix, Glendale, Peoria, Surprise, and Buckeye. The math is whether to hold rent and offer time, or cut rent and let concessions burn.
We sequence HVAC replacement, ductwork, refrigerant transition planning, and SRP and APS rate exposure modeling for 2026 budgets. Older split systems run energy bills 50 to 70 percent above a properly specified replacement, which is the math behind the capital plan.
We review Form 82603 LIHTC income elections and full cash value challenges on assets where 2024 to 2025 rent declines have not been priced in. Owners that took rent declines without contesting valuations are paying 2026 taxes on stale comp data.
For West Valley and Pinal County edge deals we run ADAWS status, CAP allocation exposure, and on-site reuse infrastructure review. The Tier 1 shortage mostly hits agricultural users, but municipal providers in Buckeye, Surprise, and Queen Creek face the bigger questions on Assured Water Supply.
For North Scottsdale, Old Town Scottsdale, Camelback Corridor, Chandler, and Gilbert deals where pipeline is thin and rent recovery is closer in time, we build a written plan covering capex, marketing reset, and realistic rent assumptions.
On Class B and Class C product, where 2025 trade volume jumped 50 to 70 percent year over year, we underwrite with realistic concession and expense assumptions instead of stabilized pro forma.
Yardi Matrix forecasts call for flat to modestly positive growth in 2026, with full recovery to historical 5 percent trend not arriving until 2026 to 2027. Submarkets with limited pipeline like North Scottsdale, Camelback Corridor, Chandler, and Gilbert stabilize first. Tempe, Downtown Phoenix, and the West Valley likely lag into 2027.
Concessions are not burning off yet. Concession share held steady in the mid-50s through 2025 against a 28 percent national average. Construction starts dropped sharply in late 2025, which sets up a 2027 reduction in lease-up competition, but stabilized properties are matching lease-up offers on renewals to hold occupancy.
The Tier 1 shortage in 2026 mostly hits agricultural CAP users. Municipal providers in Buckeye, Surprise, and Queen Creek face the bigger questions on Assured Water Supply and groundwater availability. Underwrite the asset's specific provider, ADAWS status, and any imported water arrangements before assuming pipeline value.
Plan on a ten to fifteen year useful life on equipment, $9,500 to $12,500 per three-ton condenser and air handler, plus $1,000 to $3,000 ductwork allowance per unit where original ducting is leaking or undersized. Heat pumps run $10,000 to $13,000 installed and have become the default for new equipment on Phoenix retrofits.
The figures and references on this page draw from the following industry sources.
We work with owners, operators, and ownership groups on assets and portfolios in Phoenix-Mesa-Chandler. Send a short note about the property or situation and we will follow up.