If you see a big construction crane in metro Phoenix now, chances are it’s the site of a new apartment complex.
The Valley is in the midst of an apartment building boom. Developers are almost racing to get the complexes up.
Enticed by rising rents, they are turning parking lots on prime vacant corners, old restaurants, half-empty shopping centers and older, run-down complexes into shiny, new upscale complexes.
These complexes are being quickly built, pretty rapidly filled up with renters and then sold.
Investors have spent a record $4.5 billion on Valley apartment complexes through November of this year, according to research from ABI Multifamily.
And both big-time investors, including pension funds and life insurance companies, and even individual investors aren’t done buying, ABI's Thomas Brophy said.
He said they are looking for safe investments. Because of metro Phoenix’s growth, apartments are a popular option for them.
But when the Valley goes through a building boom, there’s always concern about a bust.
“The apartment market is working like it should in Phoenix now,” Tom Simplot, CEO of the Arizona Multihousing Association and a former Phoenix councilman, told me.
He said developers are building, renters are renting and investors are buying.
As with all real estate, it’s all about location. Just like renters do, investors want Valley apartments closer in near light rail, restaurants and jobs.
Last month, the Elevation on Central complex in midtown Phoenix, which was completed just a few months ago, sold for $60 million. During the same week the Alta Tempe apartments, near the city’s lake, sold for almost $68 million.
“Alta Tempe is a premier core community with a tremendous downtown Tempe location,” said CBRE broker Asher Gunter, who negotiated those two big deals with Tyler Anderson, Sean Cunningham and Matt Pesch.
That apartment brokerage team is pretty busy now. And their investor clients definitely have a lot of new developments to choose from with more than 10,000 apartments recently built, under construction or planned in metro Phoenix.
The heady number of new apartments in the Valley gives some folks pause, though.
Many people are asking whether developers are overbuilding.
But after two years or steady increases, the average Phoenix-area apartment rent did dip a bit last month, according to research firm Yardi Matrix.
If apartment-rent increases continue to decline, fewer renters move into new complexes and investors step back from their buying spree, then development needs to slow.
We know all too well that the build-it-and-they-will-come scenario doesn’t always work out in Phoenix.