Phoenix continues to face high vacancies and declining rents due to a major surge in new apartment construction, despite strong demand. Over the past year, 17,000 units were absorbed, but 21,000 new units were delivered in 2025, pushing vacancy to 12.5%.
Rents declined 3.0% in 2025, with losses now affecting all property classes. Another 19,000 units are under construction, keeping pressure on the market. While construction is expected to slow by late 2026 or 2027, rent growth is likely to remain negative through 2026.
Phoenix MULTIfamily Market FAQ
1. Why is Phoenix experiencing rent declines despite strong demand?
Although demand remains healthy, the volume of new apartment supply has far exceeded absorption. This oversupply has increased competition among landlords, leading to higher vacancy rates and downward pressure on rents.
2. What is the current vacancy rate, and why is it so high?
Vacancy reached 12.5% in early 2026, driven primarily by the delivery of a large number of newly constructed units, many of which are still in lease-up phases.
3. How much new apartment supply is expected?
There are approximately 19,000 units under construction, equal to 4.4% of total inventory, which will continue to pressure vacancies in the near term.
4. Which areas are most impacted by oversupply?
High-growth areas such as Downtown Phoenix, Tempe, and the Southwest Valley are seeing the highest concentration of new development and are most vulnerable to elevated vacancies.
5. Are rent declines affecting all property types?
Yes. Rent softness now spans all asset classes, including workforce housing, which had previously been more insulated from new supply. This reflects the broad impact of excess inventory across the market.
6. When is the market expected to recover?
Construction activity is expected to slow by late 2026 or 2027, which should gradually reduce supply pressure. However, rent growth is likely to remain negative through 2026 as the market works through existing excess inventory.
