PHOENIX-While apartment demand was up in Tucson, Las Vegas and Albuquerque, it dropped off in Phoenix, according to a new survey by Hendricks & Partners of Phoenix.

Phoenix experienced negative absorption of 1,451 units in the second quarter, down from the first quarter’s positive absorption of 242 units, says the multifamily brokerage and research firm. “A slowdown in the local economy, coupled with Phoenix’s historical summer slowdown in demand, sent absorption into negative territory,” says Don Hendricks, president and CEO.

The negative absorption was compounded by an increase in construction. The number of new units started in the second quarter was 2,583 units, up from 1,958 posted in the second quarter a year ago.

The overall vacancy rate is now 8.2% in comparison to 7.8% a year ago. The Avondale area is the strongest submarket, with a 5.7% vacancy, down from 6.3% a year ago. Deer Valley falls second with its 7.4% vacancy, a drop from 8%, and Chandler comes in third, with 7.8%, down from 8.5% a year ago.

Rent grew by 3.4% from June 2000 to June 2001, keeping relatively steady with the prior year’s 3.5% gain. The average monthly rent is now $685, up from $662. “However, the resulting gains were tempered by concessions and higher market rents brought on by new construction, which, when factored in, produced a more likely gain of 1% or 2% for most properties,” Hendricks says. Rent growth was strongest in central Phoenix, up 5.1%; Chandler, 4.8%; west Phoenix, 4.7%; and north Phoenix, 4.4%.

In Tucson, there was negative absorption of more than 1,700 units during the second quarter. “Absorption was impacted by the seasonal departure of university students, as well as winter visitors, but rent growth and vacancy rates noted improvements,” Hendricks says.

Tucson’s vacancy rate stands at 8.9%, down from 9.6% at Q2 2000′s end. Areas with the highest concentration of students showed the highest vacancy rates. East Tucson posted a vacancy of 9.6% and central Tucson, 9.9%. Rent growth was up 3.7% for the one-year period. In June 2000, rent growth was 3.3%. The average monthly rent is $544 in comparison’s to last year’s $525.

The downswing in the economy seemingly has had no impact on the apartment market in Las Vegas, according to the Hendricks’ survey. More than 1,300 units were absorbed during the second quarter, construction remains strong and overall vacancy rate dropped to 4.1% from 4.8% a year ago.

In Albuquerque, 953 units were absorbed during the second quarter, a reporting period that saw no new units come on line. Demand drove down vacancy to 5.1% from 7.4% at the midyear mark a year ago.