Director of Research at Neighborhood Ventures
Given the many questions I have recently been fielding regarding construction, as well as market chatter about overbuilding, I want to take most of this quarterly review to discuss construction. We are living through a tectonic demographic shift pushing us further into a more renter-centric society, which started in earnest in 2011/12 and what we at ABI have coined ‘The Decade of the Renter.’
Based on Census estimates, at the National level, renter household levels have increased nearly 8% since 2000. More locally, the Phoenix MSA, as a whole, has witnessed a stunning 21% increase in renter households, impacting nearly 15% of the entire population. This tectonic shift in the renter household population was led by Glendale ~31% increase, Tempe ~21%, Phoenix ~20%, Mesa ~19% and Scottsdale ~12%.
BY THE NUMBERS
The MSA’s total sales volume increased y-o-y (10+, 10-99, and 100+ unit properties). Average Price-Per-Unit (PPU) amount increased as well across the board. As detailed in previous reports, PPU increases in the smaller property size category continues the sales trend which began in earnest in late 2016 through YTD, as mid-century built, extensively re-positioned properties have been coming back online for sale.
In regards to new construction, developers delivered 1,630 units in the 1Q, a (9%) y-o-y contraction. For 2018, developers are on track to deliver 9,000+ new units, the most since 2009’s 9,315 unit delivery high. City of Mesa and Phoenix once again claimed the top spots in the MSA for rent growth at 5.7% and 5.4% respectively, followed by Scottsdale at 5.2%, Glendale at 4.9% and Tempe at 4.7%. Scottsdale still claims the top spot in actual average rent which at $1,251 is the highest in the region.
JUST DROPPED IN TO SEE WHAT CONDITION MY ASSUMPTIONS WERE IN
Based on Arizona Department of Administration (ADOA) population growth projections, Phoenix’s new apartment unit deficit is expected to increase to +/- 32,000 units by 2020 if the higher population projections (trending towards 95%) are realized. Why is this important? With observed population growth trending higher, especially with Maricopa County as the top spot in the country for population growth, projected unit deficits could very well increase more than what is assumed.