Multi-family Consulting / Market Reports / Phoenix

2026 Phoenix Multifamily Market Report

By · Published · Updated · Version 2.1

Phoenix fundamentals improved materially in Q2 2026. Vacancy declined to 11.3 percent, year-to-date absorption rose 50.2 percent to 9,414 units, and the construction pipeline fell 35.5 percent year over year to 15,974 units. Asking rent remained 2.2 percent below the prior year at $1,536. Pricing power remains weak as the market absorbs recent supply.

Latest Phoenix multifamily data

As of Q2 2026

Asking rent
$1,536
per unit
Vacancy
11.3%
-40 bps YoY
Annual rent change
-2.2%
asking rent
YTD absorption
9,414
+50.2% YoY
YTD completions
6,355
-5.4% YoY
Under construction
15,974
-35.5% YoY

Metrics use the latest cited market report and retain that source's definitions. Compare asking rent with asking rent, effective rent with effective rent, and vacancy within the same methodology.

What is happening in the Phoenix multifamily market?

Demand outpaced new supply in the first half of 2026. Kidder Mathews recorded 9,414 units of year-to-date absorption against 6,355 deliveries, pushing vacancy down from 11.7 percent a year earlier to 11.3 percent. Construction activity is retreating quickly: 15,974 units were under construction at quarter-end, down from 24,746 a year earlier. Investment metrics also improved, with average sale price up 3.6 percent to $266,672 per unit and the reported average cap rate compressing to 5.8 percent.

Submarket performance is split. North Scottsdale was the only Yardi-tracked submarket with positive annual rent growth heading into Q4 2025. Old Town Scottsdale, the Camelback Corridor, and Gilbert hold stabilized vacancy below the metro average with thinner pipelines. Tempe, Downtown Phoenix, Roosevelt Row, and the West Valley around Glendale, Peoria, Surprise, and Buckeye carry the largest lease-up exposure and the slowest path back to rent growth. Mesa two-bedroom rents were down close to 10 percent year over year per AZ Family reporting in late 2025, and Glendale dropped 8 to nearly 12 percent. CoStar flagged Chandler and the Camelback Corridor as the two submarkets likely to return to positive rent growth first.

The operator base is concentrated. Mark-Taylor is the largest owner of Class A communities in Arizona, manages 142 communities, and ranked #1 in the 2025 TALi Awards. P.B. Bell, founded in 1976, named Justin Steltenpohl CEO in January 2025. Greystar absorbed Alliance Residential's management business in 2020 and crossed one million units globally. Camden, MAA, and MEB round out the institutional set, with MAA closing a Phoenix parcel in October 2025 to start a 280-unit project in Q4.

What is hurting Phoenix multifamily performance right now?

Concessions remain a primary leasing cost. More than half of Phoenix listings carried concessions through 2025, double the 28 percent national average. Six to eight weeks free is standard on lease-up product, with two months free or 50 percent off the first four months showing up at downtown comps like The Rey. Effective rent at the property level can run 8 to 12 percent below asking once concessions are amortized.

Operating costs are climbing into the rent decline. SRP implemented a 2.4 percent rate increase in November 2025, and APS filed for a 13.99 percent net increase that adds roughly $20 per month for typical users no earlier than July 2026. Phoenix HVAC equipment runs a 10 to 15 year useful life because of cooling-season hours and 115F-plus stretches, with a three-ton condenser plus air handler at $9,500 to $12,500 installed and ductwork repair adding $1,000 to $3,000. Owners running older split systems are seeing energy bills 50 to 70 percent above a properly specified replacement.

Water is a structural overhang. Arizona takes an 18 percent reduction to its Colorado River allocation in 2026 under Tier 1 shortage, a 512,000 acre-foot cut equal to roughly 30 percent of CAP's normal supply, with most of that hitting agricultural users. The post-2026 operating criteria for Glen Canyon and Hoover Dams expire, and Phoenix is planning deeper conservation measures. The Assured Water Supply moratorium paused new for-sale subdivisions in Buckeye and Queen Creek that relied on local groundwater. ADWR approved its first Alternative Designation of Assured Water Supply for EPCOR in October 2025, opening capacity for roughly 60,000 new homes in Buckeye and Surprise, and also approved Buckeye's plan to import 5,900 acre-feet annually from the Harquahala Valley basin. Property tax timing matters in Maricopa County. Assessor valuations land each year, with LIHTC income election petitions due before September 1 of the prior year, and full cash and limited property value mechanics run independent of operating performance.

Where we focus our work in Phoenix

The areas below show up in most Phoenix engagements. Scope is set per client based on what is actually needed.

01

Concession strategy and trade-out modeling

We work concession structure on lease-up and stabilized comps, including renewal versus new lease pricing in Tempe, Downtown Phoenix, Glendale, Peoria, Surprise, and Buckeye. The math is whether to hold rent and offer time, or cut rent and let concessions burn.

02

HVAC capex sequencing and replacement scope

We sequence HVAC replacement, ductwork, refrigerant transition planning, and SRP and APS rate exposure modeling for 2026 budgets. Older split systems run energy bills 50 to 70 percent above a properly specified replacement, which is the math behind the capital plan.

03

Maricopa County valuation review and petition timing

We review Form 82603 LIHTC income elections and full cash value challenges on assets where 2024 to 2025 rent declines have not been priced in. Owners that took rent declines without contesting valuations are paying 2026 taxes on stale comp data.

04

Water cost and supply diligence

For West Valley and Pinal County edge deals we run ADAWS status, CAP allocation exposure, and on-site reuse infrastructure review. The Tier 1 shortage mostly hits agricultural users. Municipal providers in Buckeye, Surprise, and Queen Creek face the bigger questions on Assured Water Supply.

05

Submarket repositioning analysis

For North Scottsdale, Old Town Scottsdale, Camelback Corridor, Chandler, and Gilbert deals where pipeline is thin and rent recovery is closer in time, we build a written plan covering capex, marketing reset, and realistic rent assumptions.

06

Acquisition underwriting on Class B and C

On Class B and Class C product, where 2025 trade volume jumped 50 to 70 percent year over year, we underwrite with current concession and expense assumptions.

Phoenix multifamily FAQ

How long until Phoenix rents stop declining?

The operating data is improving faster than rents. Q2 vacancy fell to 11.3 percent and absorption exceeded deliveries. Asking rent was still down 2.2 percent year over year. Flat to modest sequential growth is plausible in the second half of 2026, with annual growth more likely in 2027. North Scottsdale and other limited-pipeline areas should recover before Tempe, Downtown Phoenix, and the West Valley.

Are concessions burning off?

Concessions are beginning to narrow in selected submarkets. Q2 2026 vacancy improved by 40 basis points year over year and the active pipeline dropped 35.5 percent, which reduces future lease-up competition. Asking rents were still down 2.2 percent. Stabilized properties near active deliveries should continue to underwrite concessions through the rest of 2026.

How exposed are West Valley deals to the water situation?

The Tier 1 shortage in 2026 mostly hits agricultural CAP users. Municipal providers in Buckeye, Surprise, and Queen Creek face the bigger questions on Assured Water Supply and groundwater availability. Underwrite the asset's specific provider, ADAWS status, and any imported water arrangements before assuming pipeline value.

What is the right HVAC replacement assumption on a 1990s to early-2000s Class B asset?

Plan on a ten to fifteen year useful life on equipment, $9,500 to $12,500 per three-ton condenser and air handler, plus $1,000 to $3,000 ductwork allowance per unit where original ducting is leaking or undersized. Heat pumps run $10,000 to $13,000 installed and have become the default for new equipment on Phoenix retrofits.

Sources and references

The figures and references on this page draw from the following industry sources.

Discuss your Phoenix multifamily engagement

We work with owners, operators, and ownership groups on assets and portfolios in Phoenix-Mesa-Chandler. Send a short note about the property or situation and we will follow up.

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