The Phoenix apartment market continues to struggle with an imbalance between strong demand and excessive new supply. Over the past year, the market absorbed 17,000 units, ranking Phoenix among the top 10 U.S. markets for demand growth. However, developers delivered 21,000 new units in 2025, pushing vacancy to 12.5% in early 2026.
With another 19,000 units under construction, competition remains intense, especially in Downtown Phoenix, Tempe, and the Southwest Valley. This oversupply has driven average rents down 3.0% in 2025, with rent declines now affecting all property classes, including workforce housing.
Although construction is expected to slow by late 2026 or 2027, the market must first absorb excess inventory, making another year of negative rent growth likely in 2026.
Phoenix MULTIfamily Market FAQ
1. Why are rents declining in Phoenix despite strong demand?
Because new apartment supply is being delivered faster than demand can absorb it, creating excess inventory and increasing competition among property owners.
2. What is the current vacancy rate?
Overall vacancy stands at 12.5% as of early 2026, driven by high levels of new construction.
3. How much new supply is coming to the market?
There are approximately 19,000 units under construction, equal to 4.4% of total inventory.
4. Which areas are most impacted by oversupply?
Downtown Phoenix, Tempe, and the Southwest Valley are experiencing the highest concentration of new apartment development.
5. Are all property types affected?
Yes. Both high-end and workforce housing communities are seeing rent declines, with 1–2 Star properties down 2.5% and 4–5 Star properties down 2.9%.
6. When is recovery expected?
Construction is expected to slow by late 2026 or 2027, which may allow recovery to begin. However, rent growth is likely to remain negative throughout 2026.
