PHOENIX-Strong employment gains and fierce competition for single-family homes has fueled demand for rental properties here that will persist well into the new year, according to a fourth-quarter apartment market report by Marcus & Millichap. Companies are hiring at a brisk pace, causing the unemployment rate to fall to 7.4%, a 120-basis point improvement from the beginning of the year.
The report shows a 2.9% increase in total employment, with more than 50,000 new jobs created this year and 28,600 positions added to the metro. As a result, median household income here increased by 4% during the last year, and some households are putting their homes up for sale in a manner not seen since before the recession.
Competition for for-sale homes has been strong as cash-heavy investors outbid a large portion of potential homeowners, which is pushing these would-be buyers to seek new builds or remain in the rental community. However, as the housing market stabilizes, demand for apartments could slow in the next few years.
In the meantime, demand for rentals will remain strong across the metro, the report predicts, particularly in Scottsdale, Tempe, Chandler, Midtown and Uptown, where vacancy rates are expected to fall below an average of 5% this year. In tertiary markets such as Goodyear and Mesa, firm employment gains in lower-paying industries will drive demand for class-B and –C units, which should support positive absorption in these areas.
Approximately 1,260 apartment units are set to be completed in 2012. Of these, nearly half will be delivered in Tempe, 450 in Phoenix and 225 in Chandler. This is significantly higher than the 450 units delivered to the metro in 2011.
Supported by positive net absorption in every submarket, an additional 4,300 units will be occupied this year, and as a result, vacancy will contract 120 basis points in 2012 to 6.1% as compared to the 240 basis points the vacancy rate fell in the prior 12-month period.
Average asking rents are expected to finish the year at $783 per month, marking a 2.4% increase from 2011. In the same time frame, effective rents will accelerate 3.2% to a record high of $718 per month as compared to asking rents and effective rents rising 2% and 2.2%, respectively, in 2011.
For the full report, click here.
As GlobeSt.com previously reported, Weidner Investment Services has picked up its 28th apartment project in Arizona. The Seattle-based company purchased La Palma in North Phoenix from LAP La Palma Apartments Phoenix LP, a trade name controlled by Newport Beach, CA-based WLA Investments entities, for $30.1 million.