It is no secret that the Valley is one of the strongest real estate markets in the U.S. The growth and appreciation include positive trends in the Phoenix rental market for both the residential and commercial sectors. According to RealPage, Phoenix residential multi-family property rents have increased nearly 50% since 2010 and as of January 2020, Phoenix annual rent growth has climbed to 7.7%, far outperforming the national average of 2.9%. But what are the driving trends in the Phoenix rental market?
Driving trends in the Phoenix residential rental market
Demand for single-family and multi-family housing remains high. According to NoradaRealEstate, the single-family Phoenix rental market has grown 30% over the last three years. At the same time, rents have increased 8.1% over last year, the highest in the nation, with the average rent at $1,100 a month according to RealPage.
There are several factors driving these trends:
More amenities, less responsibility
It is well-known that Millennials are choosing to rent rather than to own. They prefer low- maintenance, high-amenity living that allows them to come and go as they like. At the same time many Boomers are choosing to sell their large empty-nester homes and rent while they decide how and where they want to live their golden years.
Growing student population
The Valley is host to many community colleges and universities including several ASU campuses, Grand Canyon University and U of A and NAU extensions. The influx of students is spurring demand for rental properties in and around Greater Phoenix.
The Airbnb effect
Phoenix has always been a strong market for tourists and snowbirds. Its fabulous weather, active lifestyle and numerous entertainment options have secured the Valley’s spot as one of the nation’s top tourist destinations. Coupled with Arizona’s friendly short-term vacation rental laws, single-family and multi-family short-term rental properties are becoming an increasing percentage of the Phoenix rental market.
Driving trends in the commercial rental market
As mentioned earlier, the demand for multi-family commercial properties has increased dramatically in the Phoenix rental market, and so too has the demand for commercial office, retail and industrial space. The forecast for the Phoenix commercial real estate market remains positive and rents are increasing.
Best place to work
Arizona’s relative low-cost of living and doing business make the Phoenix commercial real estate market attractive to companies. Office vacancy rates have decreased dramatically in the last 10 years. At the same time, we continue to see new commercial projects, including mixed use projects like Park Central being built with live/work amenities and companies moving or adding operations in the Phoenix area. Shared workspace is also a growing trend.
Retail follows residential
As new communities and apartments spring up in our urban areas and suburbs, they drive the demand for neighborhood retail and entertainment space. Established areas are seeing redevelopment and retooling of existing retail space.
Hot spot for distribution and data
The growth of e-commerce is creating high demand for warehouse and distribution space. Logistics is booming and Phoenix is ideally situated with its access to major markets, availability of open land, absence of natural disasters and friendly business environment. Data and technology centers are growing for many of the same reasons.
People and businesses continue to be drawn to the Valley for a variety of reasons making the Phoenix rental market an attractive one in both the commercial and residential arenas.
If you are considering investing in Arizona real estate, Landmark Title specializes in residential and commercial title and escrow services. Contact us today to learn more about our services.