Metro's Multifamily Supply Stifling Occupancy, Rent

The firm's latest Phoenix Apartment Report shows occupancy at 92%, down 3.9% from the 2000 close and 1.9% under the current national average. Rent overall dropped 1.4% last year. The biggest hit, a 4% to 5% drop, came in Chandler/ South Phoenix and Gilbert/Southeast Phoenix, where significant completions and high-tech job cuts made the leasing environment particularly competitive. South Glendale/South Peoria posted the strongest rent gains in the region although the growth pace was held to less than 2%.

The 27,600 lost jobs last year were primary drivers for today's sagging rents. The metro Phoenix average is now $687 per month. North Scottsdale leads the market with $854 per month.

Although Phoenix was one of just a few metros nationally to register positive demand in the October through December, it was not enough to counter dramatic move-outs experienced in the second quarter. The year's net move-outs totaled 1,400 units while new supply added another 8,458 units. There were 8,900 units under way at the 2002 start. More than 1,800 units are coming out of the ground in Chandler/South Phoenix, 1,500 in Mesa and nearly that same amount in Phoenix's Intown corridor.

"With continued substantial volumes of new product in the development pipeline, Phoenix's apartment market appears likely to continue to struggle in the near term," Willett concludes. The market fell in the fourth quarter at a time when metro Phoenix historically hits a high from an influx of snowbirds.

M/PF's analysis of 14 submarkets included 106,000 units in the total 245,000-unit inventory. M/PF does not track transactions in the market, where there has been a steady turnover in trading.