By Catherine Reagor| February 21st, 2021
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A Phoenix apartment complex recently sold for a record $178.5 million.

The deal is one more sign of the strong demand for rentals in the region despite the pandemic and an eviction moratorium. 

Though apartment sales were down in 2020, metro Phoenix still ranked No. 3 in the U.S. for the most rental complexes selling last year.

And as rents are falling by double-digit rates in pricier cities such as San Francisco, Seattle, Chicago and New York, the average Phoenix area tenants are paying 5% more than they did a year ago.

That’s what’s driving investors to pay higher prices for Phoenix-area apartments. But higher sales prices likely will lead to more rent increase for tenants.

Apartment construction only slowed slightly in the midst of COVID-19, and the cities with the least new multi-family complexes are seeing the biggest bumps in rents.

Why a record price?

A Salt Lake City investor paid the record price for the 832-unit Heritage at Deer Valley, next to the Loop 101 and Interstate 17 junction in the northwest Valley.

“We are bullish on Phoenix’s growth potential,” said the buyer, Millburn & Company CEO Jed Millburn.   

The average apartment rent in Deer Valley climbed 4.1% over the past year, and the vacancy rate for the area is only 4%, according to brokerage CBRE.

CBRE’s Tyler Anderson, Sean Cunningham, Asher Gunter and Matt Pesch negotiated the deal.

More than 33,000 apartments are under construction in metro Phoenix now, and another 47,000 are planned, according to ABI Multifamily.

But the Deer Valley area has a small number of those new projects, which made the Heritage complex, built in the late 1990s, a hot commodity.

Apartment sales and prices

Although the overall dollar volume of apartment sales in the Phoenix area fell about 1% to $6.85 billion in 2020, the price per apartment climbed.

Investors paid an average $191,441 per apartment for complexes with more than 100 units last year, up 15% from 2019, according to ABI. The average price per apartment for smaller complexes climbed 23% to almost $149,000.

The deal for the Heritage apartments in Deer Valley breaks down to $214,500 per apartment.

Only Dallas and Atlanta had more apartment sales than metro Phoenix during 2020, according to Commercial Search.

But rents were flat or down slightly in those two cities.

Average rents on the rise

The West Valley suburb Surprise saw rents jump almost 15% to an average $1,250 for a one-bedroom apartment over the past year, according to research firm Zumper. That’s the biggest increase in metro Phoenix.

A look at average rents by city for one-bedroom apartments since January 2019:

  • Peoria, up 12% to $1,250.
  • Mesa, up 11% to $1,020.
  • Chandler, up 9% to $1,330.
  • Tempe, up 8% to $1,120.
  • Gilbert, up 6% to $1,340.
  • Avondale, up 4% to $1,130.
  • Phoenix, up 4% to $1,010.
  • Scottsdale, up 3% to $1,500, making it the priciest city for tenants in metro Phoenix.
  • Glendale, up 2% to $910, making it the most affordable Valley city for tenants.

Bad news for renters

Despite the many new apartments going up, most apartment analysts believe rents will continue to climb in metro Phoenix this year.

The Valley's heady population growth is why. 

Reach the reporter at [email protected] or 602-444-8040. Follow her on Twitter @Catherinereagor.

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