(To read more on the multifamily market, click here.)

PHOENIX-The buzz on multifamily product has focused on condo conversions, with developers snapping up existing complexes and raw land to develop for-sale units. The two-year condo craze, coupled with job and population growth, is leading to increasing apartment rents and higher than usual occupancies.

Local experts tell GlobeSt.com to expect more of the same in the foreseeable future. “The rental market has tightened unbelievably and concessions have gone away across all classes of building,” says Cindy Cooke with Colliers International Inc. in Phoenix. “We’re looking at high occupancies across the Valley and will continue to do so.”

Brad Goff with ARA Realty Advisors’ Phoenix office agrees. “Concessions are things of the past,” he says. “About a year ago, you could get a couple of months’ concession. These days, the average is two weeks or less.”

Still, others points out that while condo growth has taken a bite out of the apartment sector, it’s a little too soon to sound a death knell for the rental market. The region’s drawing board is holding about 10,000 condo units. “We have a base of roughly 340,000 units overall. Granted, 10,000 is a large number, but not a huge percentage of what’s out there,” says Todd Braun of Cushman & Wakefield Inc. of Arizona Inc.

Condo converters are one reason for a tight rental market, but Braun explains there are other factors entering into play. “The market has seen significant improvement in the past year and that’s a function of very strong job and population growth,” he says. “Also, there’s been a real lack of new construction on rentals in the area.”

Another main culprit leading to a shrinking rental market is single-housing costs, which increased close to 50% during 2005. Renters who would normally buy houses are staying put as a result.

While economics and demand naturally leads to increased rents, Cooke points out they’ve have been historically low in the area. “They’ll have to catch up at some point,” she says. “This year, we’ll be getting back to where we were prior to 2001.”

Phoenix, though, is no stranger to climbing occupancies and rents. “It’s cyclical,” Goff notes. “We can expect vacancies to go sub 5% and expect rents to increase by 10%. Once that happens, low vacancy, followed by significant rent increases will be followed by development, then flatter rents for awhile.”

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