Thousands of rentals filling in the Valley's core

by Tom Simplot

May 1, 2015

Living closer in to be near jobs, restaurants, shopping and light rail is apparently what more metro Phoenix residents want now. And developers are quickly catching on.

Condo sales and prices are climbing faster than single-family or stand-alone houses in the Valley for the first time. Home values in central Phoenix, Tempe and Scottsdale are increasing faster than other parts of the region.

But it's the rental market that is really leading the area's infill charge.

Almost 1,000 condos are underway in central Phoenix, Scottsdale, Tempe and Glendale. But more than 12,000 apartments are already under construction within the central Valley — basically defined as inside the Loop 202 and 101 freeways.

And at least another 13,000 apartments are planned for the metro Phoenix core, according to the latest construction report from ABI Multifamily.

Many new infill apartment complexes are going up on some of the Valley's last prime, vacant parcels or sites where older buildings are being rehabbed or torn down.

In central Phoenix, a project called the Muse, with more than 350 apartments, is being developed by home builder Lennar on the long-empty northwest corner of Central Avenue and McDowell Road. At Roosevelt and First Avenue, where the street was realigned for the development, Union @ Roosevelt with 80 apartments is going up.

Near Tempe Town Lake, more than a thousand apartments are underway or ready for renters in complexes called SALT, Hanover Mill and Skywater.

In south Scottsdale, there's the Skysong complex next to the popular development with the same name. In downtown Scottsdale, trendy and more pricey rental projects called the Moderne and the Standard are planned or under construction.

Former Phoenix City Councilman and CEO of the Arizona Multifamily Association Tom Simplot told me apartment developers test the market; if their projects lease quickly then condos follow.

"Many people want to rent and try out an urban area before buying," he said.

Apartment vacancies have plummeted and monthly rates have climbed during the past few years.

Valley's apartment vacancies are half of what they were five years ago. Currently, about 6.4 percent of the region's apartments are empty, according to Colliers International. At the end of 2009, the vacancy rate was 13.4 percent.

During the past five years, the average monthly apartment rent in the Phoenix-area has climbed more than $100 to about $850.

Demand has shot up for central Valley apartments during the past few years, and that has driven up rents.

Now that supply is rapidly climbing, however, renters might get a break.