GPCI Multifamily and Land Development has tips on investing in real estate

GPCI Multifamily and Land Development has tips on investing in real estate

GPCI Multifamily and Land Development is a paid advertiser of Sonoran Living.

Learn More about Apartment Investing with Terry Kass of GPCI Multifamily and Land Development

If you want to learn more about investing in small to mid-sized Arizona apartment complexes, Terry Kass is the Scottsdale-based real estate specialist you’ll want to call. Throughout Terry’s 25-year career in the multifamily sector, he has focused on advisory and brokerage of small to mid-sized apartments in the greater Phoenix market. During his tenure, Terry has closed more than 500 multifamily transactions. He holds the prestigious designations of the CCIM (Certified Commercial Investment Manager) and CPM (Certified Property Manager) and is a renowned real estate educator, speaker, and published author. Terry is also a partner and designated broker with GPCI Multifamily and Land Development in Scottsdale.

The other team members at GPCI are also multifamily and land development experts, specializing in smaller to mid-size projects. They bring over 50 years of experience in brokerage, property management, consulting, and ownership – all in multifamily and land development.
At GPCI Multifamily and Land Development, they pride themselves in offering a more intimate working relationship with clients whose interests come first. They cooperate with outside brokers to ensure optimum exposure to maximize the client’s returns and will not recommend a deal that’s bad for the client just to book a commission. The principals at GPCI are long- time Valley residents, apartment owners, and small developers.

GPCI understands the acquisition/disposition process and will work with clients to leverage financing, property location, management, renovations, turnover, occupancy, and expense control, all of which affect the bottom line. GPCI knows the local Arizona market and looks forward to helping clients identify viable investments.

Investing in 2-4 unit apartment buildings is a “low barrier to entry” starting point to develop a real estate portfolio for beginner investors as well as those interested in pivoting from investing in single family homes to multi-family buildings. Four compelling reasons include:

1. FINANCING: 4 units or less can qualify for residential financing through a local lender. This is important for beginners because rates tend to be more attractive and the loan underwriting process depends more on the financial wherewithal of the borrower, less on the rental profile of the building.

2. PROPERTY MANAGEMENT: Smaller buildings are easier to manage, often owners will manage the property themselves, saving on the expense of a property manager.

3. RESALE: Because it is a smaller asset (i.e. more affordable) there is usually a robust market for resales.

4. DIVERSIFICATION: Apartment buildings often offer an investor a way to diversify their balance sheet or net worth and add real estate to their stocks, bonds and cash. It also can provide passive income to hedge against future “unemployment” whether that includes a career switch or retirement.

To speak with Terry Kass, call (602) 703-5277. For more information about GPCI Multifamily and Land Development, visit .

About Greater Phoenix Commercial Investments (GPCI):
GPCI Real Estate is a brokerage specializing in Multifamily Apartment Investments and Residential Land Development in the Greater Phoenix MSA. We are a Real Estate Investment Brokerage, with a dedicated team of professionals with over 50 years combined real estate experience in multifamily housing investments. Click link below for more information on our team, services, and property listings.

The good, bad and ugly of renting in America today

A lot has changed in the last 30 years for renters – some for the better and some still leaving much to be desired. The Joint Center for Housing Studies of Harvard University released its 30th anniversary State of the Nation’s Housing report this year and it provides an opportunity to reflect on how housing market conditions in the U.S. have evolved over time, looks at current trends and reveals how we still have progress to make when it comes to all Americans having decent, affordable homes.

Here are some of the key takeaways from the study.

1. Most people are paying more of their income towards rent

Many renters now are cost-burdened, meaning they use more than 30 percent of their income to pay for housing and may have trouble paying for other necessities such as food, clothes, transportation and medical care.

This is mostly due to massive increases in housing costs, with the national median rent rising 20 percent faster than overall inflation from 1990 to 2016. (Homeowners aren’t immune either as the median home price rose 41 percent faster than inflation in the same timeframe.)

Quality of housing has improved some, but the main cause is the increased expenses involved in housing construction and land. If you’re a renter, you may be thinking, “Yeah, no kidding.” But this just means that budgeting well, saving what you can and researching all your options are critical to not spending any more money than you need to on renting your home.

2. There is a slight shift to more people buying (vs. renting)

After ten years of rental demand growing, Americans are starting to get back into the homebuyer market. From 2005 – 2015, the number of U.S. households renting grew by an average of 850,000 each year, yet from 2015 – 2017 rental households grew only 220,000 annually. It’s still a bit early to qualify as a rebound in home buying, but the U.S. homeownership rate does look to be stabilizing.

Deciding whether to own or rent involves weighing many factors, including how long you plan on staying in one place, relative costs, your ability to tolerate financial risk and the benefits you see with each option.

Many Americans are still opting to rent because it makes sense for them. Down payments require a solid savings, especially in markets with expensive housing markets. Many millennials are waiting to buy homes later than the older generations (Generation X and Baby Boomers) according to another study by the Urban Institute in 2018.

There are differences based on income as well – the number of high-income renters is growing while the supply of rentals those with the lowest incomes can afford continues to shrink.

3. Rental housing demand remains positive

While growth in rentals may have slowed, the overall demand is still positive. Millennials still often rent before buying when they move or combine households, and many older households are making the switch from owning to renting in order to reduce upkeep and downsize.

There is also a huge demand for affordable rental housing, with 15.5 million households having very low- and extremely low-incomes as well as the increase in cost-burdened households mentioned previously.

4. Renters are moving less

Renters historically move more often than homeowners, yet their mobility rate (how frequently they move) has dropped substantially.

The decrease in renters moving is likely because of a variety of trends, including the increased likelihood that adult children live with their parents, rising student loan debt that makes it more difficult for young adults to move out on their own and the scarcity of low-cost rentals in some areas which may mean tenants stay in one rental longer even if it’s not the ideal place for them.

Also, while many older Americans do downsize, a growing number of older renters are staying in their homes longer than previous generations.

Though rental growth rates rent inflation and the percent people pay towards renting may change, there will always be a need for many Americans to rent homes. Thus, it’s important to understand the details of your market and weigh the amenities and features you want (and need) against the availability and cost of the rental. Read more here about what renters say is most important to them when looking to rent a home.

For more information, visit the  Apartment Guide Blog.

Ellen Sirull is an author for Apartment Guide.

About Greater Phoenix Commercial Investments (GPCI):
GPCI Real Estate is a brokerage specializing in Multifamily Apartment Investments and Residential Land Development in the Greater Phoenix MSA. We are a Real Estate Investment Brokerage, with a dedicated team of professionals with over 50 years combined real estate experience in multifamily housing investments. Click link below for more information on our team, services, and property listings.

Phoenix Apartment Market Bumps its Rent Growth in Q3

The nation’s apartment market saw a reversal in rent growth trends in 3rd quarter 2018, as previously slowing price positioning suddenly rose again. While nearly all top 50 markets picked up some momentum in recent months, a handful progressed at an especially solid pace, according to RealPage, the leading global provider of software and data analytics to the real estate industry.

U.S. apartment rental rates climbed 3.0% year-over-year as of 3rd quarter, notably above the 2.5% increase from 2nd quarter. This was the first time in roughly four years that rent growth momentum took such a significant upward turn of 50 basis points (bps) or more.

In Phoenix, there was 6.3% rent growth year-over year in the 3rd quarter 2018.

Among the nation’s 50 largest markets, Austin logged the most improvement recently, with rental rates going from essentially flat in 2nd quarter to growth of 2.6% in 3rd quarter – an increase of 200 bps. In fact, this was Austin’s heartiest price increase in two years, following a period of rent growth draught that lasted for five consecutive quarters. All product classes logged positive momentum in recent months, though the Class B and C units recorded more significant boosts after several quarters of flat prices or rent cuts.

Most submarkets across Austin also logged at least some progress, though Northwest Austin and Pflugerville made the greatest headway, after recording some of the market’s steepest rent cuts in 2nd quarter. Meanwhile, Austin’s urban core, which is already very expensive compared to the suburban submarkets, is back to being the Texas capital’s rent growth leader, with a year-over-year hike of 5.1%, though that growth is only marginally above the increase logged in downtown in mid-2018.

Meanwhile, Phoenix rents climbed 6.3% year-over-year, following a more moderate increase of 4.8% in 2nd quarter. This annual performance ranked third best among the nation’s largest markets and came in well ahead of the 4% average price increase Phoenix has seen throughout the current economic cycle. All product lines recorded notable upturns between mid- and fall 2018 performances. But the standout was the Class A stock, which built upon the already strong price increases this product line has seen recently, despite record competition levels. Submarkets where rent growth jumped significantly in 3rd quarter included East Mesa, South Phoenix and Deer Valley.


San Jose went from rent growth of 3.9% in 2nd quarter to an increase of 4.9% in 3rd quarter. This was the market’s strongest annual rent hike since early 2016, before pricing power all but disappeared for a few years. The 3rd quarter showing also ranked San Jose at #5 for annual rent growth among the nation’s 50 largest markets. While the Class A stock in San Jose – some of the most expensive product in the country – saw rent growth soften recently, the Class B and C units logged considerable upward momentum.

North San Jose/Milpitas and East San Jose were the San Jose submarkets that logged the biggest upturn in rents in recent months. While Class C stock was the clear winner in these neighborhoods, Class A product also saw a notable upturn in North San Jose/Milpitas, where both apartment supply and demand have been considerable during the current cycle.

After registering an essentially flat rent performance in 2nd quarter, Chicago made notable improvement in 3rd quarter, with annual price growth swelling to 1.3% – an increase of 100 bps. While this remains one of the poorest year-over-year showings among the top 50 markets, the new progress marks a hopeful change following eight consecutive quarters of price softening in Chicago.

All product segments in the Windy City recorded price bumps in 3rd quarter, but the Class A stock saw the most impressive movement, especially in Bronzeville/Hyde Park/South Shore, Streeterville/River North and The Loop, which were also the submarket-level leaders for rent growth upturns. This is quite a change for Chicago’s Class A product line, which had been struggling in the face of big supply volumes in the past year or so.

Annual rent growth in Washington, DC was at 1.1% in 2nd quarter but climbed to 2% in 3rd quarter. It’s been more than two years since price increases here hit the 2% mark. Still, like Chicago, Washington, DC’s year-over-year showing remains near the bottom of the performance spectrum across the 50 largest metros. Additionally, when looking at the U.S. capital’s pricing performance during the current economic cycle, the market has registered one of the slowest growth rates in the nation.

The upturn in rent growth between 2nd quarter and 3rd quarter was relatively balanced across all product classes in DC, but the Class A stock, which has faced stiff competition recently, has made the most improvement over the past few years. Loudoun County, Suitland/District Heights/Capitol Heights and Central DC made the most progress between 2nd quarter and 3rd quarter. In Loudoun County and Central DC, rents went from essentially flat or falling at mid-year to moderate upturns by fall 2018. In Suitland/District Heights/Capitol Heights, however the mid-year performance was already strong, but got even stronger in the past few months. Year-over-year rent change was at 6% in 3rd quarter in this neighborhood, the best rate seen across Washington, DC.

About Greater Phoenix Commercial Investments (GPCI):
GPCI Real Estate is a brokerage specializing in Multifamily Apartment Investments and Residential Land Development in the Greater Phoenix MSA. We are a Real Estate Investment Brokerage, with a dedicated team of professionals with over 50 years combined real estate experience in multifamily housing investments. Click link below for more information on our team, services, and property listings.

With existing home sales at a three-year low, are more people turning to renting?

With home prices and interest rates both on the rise, will more people look to renting as their only “affordable” option for housing? It looks like that might already be happening.

Newly released data from the National Association of Realtors shows that existing home sales fell to a three-year low in September, as home prices rose for the 79th straight month. That’s more than six years of monthly price gains, and it’s putting a squeeze on housing affordability.

Another headwind for single-family housing is that interest rates are basically at the highest level they’ve been at in 10 years.

Combine steadily rising home prices with recent record-high interest rates and now people can’t afford as much house as they could just a few months ago.

And that could push people to look for an alternative: renting.

“For a while, inventory was the main scapegoat for sales volumes that failed to launch, under the theory that it’s hard to buy meaningfully more homes when there are significantly fewer homes actually available for sale,” Zillow Senior Economist Aaron Terrazas noted about Friday’s existing home sale report

“But that argument is harder and harder to sustain with every passing month, with nationwide inventory declines slowing dramatically and the number of homes for sale actually on the rise in many large markets,” Terrazas continued.

Instead, Terrazas said that the “recent sluggishness” in home sales seems to be driven by decreasing demand driven by rising interest rates and rents that are finally moderating (or perhaps even slowing down).

And that could keep people renting for the foreseeable future as renting appears to be more affordable than buying for many people now.

“As rents surged in recent years, many renters sought refuge in the homeownership market, attracted by the stability of long-term payment schedules and rock-bottom interest rates that helped keep those payments themselves incredibly low,” Terrazas said.

“With rents stabilizing, that sense of urgency may be diminished somewhat – and renting itself may be seen as a better bargain as rising mortgage interest rates, still-rising home prices and sluggish wage growth dent the affordability advantage of a typical mortgage,” Terrazas added.

NAR Chief Economist Lawrence Yun said there could be a respite for first-time homebuyers if the job market continues to improve, leading to more people having more money to spend on a house instead of an apartment.

“Rising interests rates coupled with increasing home prices are keeping first-time buyers out of the market, but consistent job gains could allow more Americans to enter the market with a steady and measurable rise in inventory,” Yun said.

But NAR President Elizabeth Mendenhall cautioned that there simply isn’t enough single-family housing right now that’s affordable for first-time buyers, another factor that could keep people renting.

“Despite small month over month increases, the share of first-time buyers in the market continues to underwhelm because there are simply not enough listings in their price range,” Mendenhall said.

In fact, it appears that renters are increasingly more likely to view renting as an attractive financial option.

A new survey from Freddie Mac shows that a whopping 78% of renters believe renting is more affordable than owning, which is up by 11 points from just six months ago. That’s despite the majority of renters (66%) reporting difficulty in affording their rent at some point during the past two years.

And that belief is spread across all age cohorts as well. According to the Freddie Mac survey, 75% of Millennials believe renting is more affordable than buying. That’s up by 14 points over the last six months.

It increased in the other major age groups as well. Per Freddie Mac’s survey, 70% of Generation X views renting as more affordable (up 11 points since February) and 81% of Baby Boomers think of renting as more affordable (up eight points since February).

So even though the majority of renters have had “difficulty” paying their rent, they still view renting as a more affordable option that buying. That’s good news for the multifamily business and bad news for the homebuying business.

By Ben Lane

Apartment Rentals Now Make Up a Larger Share of New Housing Units in the U.S. Than They Have in Decades

Apartment rentals have been luring residents away from other kinds of housing since the housing crash—and that is not likely to change in the foreseeable future.

“Apartments should continue to play a role in the total housing market that goes beyond the historical norm,” says Greg Willett, chief economist for Real Page Inc., a property management software and services provider based in Richardson, Texas.

In the years after the Great Recession, millions of people lost homes to foreclosure and had to move, often into apartments. The extra demand for units was not expected to last more than a few years. However, today—more than a decade after the collapse of Lehman Brothers—the percentage of American households that own their own home is still near its low point. New households are still much more likely to chose to live in rental housing than in the years before the crash.

Preferences shift towards apartments

The U.S. economy has been adding jobs for nearly a decade and is now close to full employment. But households are still much more likely to chose rental apartments than before the crash. The factors driving this decision are not likely to change quickly.

In the second quarter of 2018, the share of households that owned their own home was 64.3 percent, according to the U.S. Census. That’s barely improved from its low point of 63.4 percent in 2015, and far from its high of 69.0 percent in 2004. “Every major age cohort the Census tracks is owning at rates below what we saw from the mid-1990s to 2000s,” says Justin Tochtermann, senior consultant with research firm the CoStar Group.

Even the youngest potential homebuyers—the members of Generation Z—are not buying houses the way people their age have in previous decades. Among people under 25 years old, just 22.6 percent owned their housing in 2017, compared to 25.7 percent in 2005. These youngest households were not scarred by the Great Recession and entered adulthood amid a growing job market and a healing economy.

“Lifestyle preferences have shifted towards renting,” says Tochtermann. Young people are waiting longer before they form their own households, as well as before they marry and start families, he notes.

Young people today also prefer to live close to where they work, in neighborhoods that are more active than the bedroom communities that were acceptable to prior generations, according to numerous surveys. “The far-flung suburbs with the most affordable housing options don’t offer the lifestyles that many young adults prefer,” says Willett. In addition, in many metropolitan areas, more desirable neighborhoods are already built out, with little room for new single-family development.

Economic factors have also made it more difficult for people who want to own their own homes to buy a house or condominium. For most of the last decade, average wages have not grown as quickly as the cost of housing, both for rental apartments and for for-sale product. “That means it’s been tough for young adults to save for purchase down payments, reflecting the share of income needed to cover rent, as well as meaningful debt burdens for some young adults who financed their educations via student loans,” says Willett.

Lots of new apartments amid an overall housing shortage

As a result of these shifting preferences, apartment rentals are becoming a bigger part of the housing market than they used to be. In 2018 and 2019, more than a quarter (27 percent, on average) of the new dwelling units completed by developers will be apartments, including both luxury and affordable units. A dozen years ago, in 2004, 2005 and 2006, fewer than one-in-ten (9 percent, on average) of the new dwelling units completed by housing developers were apartments, according to analysis by brokerage firm Marcus & Millichap.

Developers are opening a lot of new, luxury apartments—300,000 to 325,000 a year since late 2016—and they are likely to keep that frantic pace through the end of 2019, according to RealPage. That’s significantly faster than the rate at which developers built new apartments over the last few decades.

But, overall, builders are creating fewer units of new housing—just 1.2 million a year are anticipated for 2018 and 2019. That’s down a third from 1.8 million a year in 2005, 2006 and 2007. It’s also fewer than the 1.3 million new households anticipated to be formed in 2018 and 2019.

“It’s difficult for developers to build large numbers of starter homes like they did in the past,” says John Sebree, director of the national multi housing group in the Chicago office of Marcus & Millichap.

To fill the demand for rental housing, apartment developers are building far more new buildings than they have in the past, but their activity is not enough to make up for the shrinking number of houses built by single-family homebuilders.

“We are not delivering as many new units as we have in the past compared to household growth,” says Sebree. “Even though we are building a lot of new dwelling units, we are not keeping up with that demand.”

By Bendix Anderson

221K people relocated to Metro Phoenix from 2012-2017

With the middle-class squeezed by the rising cost of living, particularly housing costs, many average-earners find it an onerous endeavor to create a decent life for themselves and their families. Living in a big metro like New York or Los Angeles may come with a high income and more opportunities, but the cost of housing in these expensive areas can place a middle-class lifestyle too far out of reach.

The data itself tells the story. The average monthly rent in Manhattan is around $4,100, which represents a crushing 59% of the area’s median household income ($83,500), and the median cost of a home in the borough is $1.1M, 13 times the median income. The price to income ratio is a commonly used indicator of how much house one can afford and the recommended ratio is 2.6. Another example is Los Angeles County, where the rent costs on average $2,100 per month or 38% of income, and the median price of a home is around $630,000, almost 10 times the median yearly income of $66,000 in this area.

One solution to this issue is to move, so we decided to take a look at population movements within the U.S., using the most recent U.S. Census county-level population data. According to the U.S. Census Bureau, around 55% of those who decide to move do so for a housing-related reason, such as to relocate to a new or better home, to find cheaper housing, or to own their home instead of rent.

Maricopa County tops the list of desirable places to relocate with a 221,000 net population increase via domestic migration between 2012 and 2017.

The median household income in the Phoenix area is around 63,000, only about $3,000 less than that in Los Angeles metro ($66,000). Meanwhile, the rent is $1,000 per month cheaper in Phoenix.

To figure out which counties saw the largest net changes in population due to moving in or out of the county, RentCafe subtracted the total outbound domestic migration from the total inbound domestic migration over a five-year period between 2012 and 2017. As such, we came up with the list of counties where domestic migration over a 5-year period translated into the highest net gain in population versus the counties where domestic migration brought about the highest net loss of population over the same period of time. This analysis looks strictly at resident population movements (domestic migration) across county lines, and does not include international migration (immigration) or natural population changes due to natality or mortality.

Moving away from an expensive, so-called first-tier metro to a more affordable second-tier metro is a major trend frequently referred to as “affordable migration.” Here’s a side-by-side look at the top 10 counties Americans are leaving and the top 10 counties Americans are moving to:



Valley home prices still on rise; outpace national average in August

Valley home prices continued their rise during the summer, easily outpacing national averages in August, according to the latest CoreLogic price report.

The region saw a 7.43 percent price increase compared with August 2017, pushing the region into an “overvalued” ranking from CoreLogic.

Despite the increasing prices, home values still are roughly 11 percent below the peak value in 2006, the report stated.

Nationally, home prices rose 5.5 percent year over year, which actually represents a slowdown from previous months as the lack of affordable housing nationally and higher interest rates means fewer homes are selling.

“The rise in mortgage rates this summer to their highest level in seven years has made it more difficult for potential buyers to afford a home,” said Frank Nothaft, CoreLogic’s chief economist, in a statement. “The slackening in demand is reflected in the slowing of national appreciation, as illustrated in the CoreLogic Home Price Index. National appreciation in August was the slowest in nearly two years, and we expect appreciation to slow further in the coming year.”

Phoenix homebuilders and real estate agents have cited similar issues in the Phoenix market in recent months, but home prices have continued to rise. Zillow, an online real estate database, reports that the average home value in the Phoenix market reached $231,200 as of the end of September.

As a result of the confluence of events, 38 percent of U.S. markets are considered overvalued. Of the top 50 markets, 48 percent are considered overvalued.

Phoenix Business Journal took a deep dive into the numbers for a cover story in September on the issue of housing affordability.

By Patrick O’Grady

Rent Growth Holds at 1.2% as Vacancy Rate Rises in Q3 2018

The apartment vacancy rate rose by 0.1% in the third quarter of 2018, moving from 4.7% in the second quarter to 4.8%, according to the 3Q2018 Reis Preliminary Apartment Trends Release. The vacancy rate has risen by 40 basis points since Q3 2017, and by 70 basis points since its last low of 4.1% in Q3 2016.

Both the national average asking rent and the national average effective rent rose by 1.2% in the third quarter. The national average asking rent is now $1,424 per (market rate) unit, while the effective rent is $1,356 per unit. Average asking rents have risen 4.5% from the third quarter of 2017, and effective rents rose 4.2%.

Net absorption was 35,683 units in the third quarter, while new construction was 50,475 units, both lower than last quarter (57,988 units absorbed, 67,417 built) and lower than the 2017 quarterly average (46,685 absorbed, 61,535 built).

Barbara Byrne Denham, Reis senior economist, notes that while the apartment market had started to slow at the end of 2017 and start of 2018, the passage of the tax reform bill reduced tax incentives towards home ownership. This has provided some boost to the apartment market, especially in high tax areas.

“We expect construction to remain robust for the rest of 2018 and in the first half of 2019 before completions drop off in subsequent periods,” says Denham. “Occupancy is expected to remain positive, although vacancy rates are expected to increase, as new supply will outpace demand growth. Still, as long as job growth holds steady, we expect rent growth to remain positive over the next few quarters.”

At the metro level, the vacancy rate rose in 45 of the 79 metro markets tracked by Reis this quarter. Chattanooga, Tenn., had the highest vacancy rate increase at 0.9%, up to 6.2% for the quarter, followed by Fort Lauderdale, Fla., and Louisville, Ky., Pittsburgh, Penn., had the sharpest vacancy rate decline at -0.6%, down to 5.3% for the quarter, followed by Tulsa, Okla., and Birmingham, Ala.

Forty-eight metros posted effective rent increases of 1.0% or more, and five posted increases of 2.0% or more. Memphis, Tenn., led the nation at 2.3%, up to $798, followed by San Diego, Los Angeles, and Seattle. Only Orange County, Calif., Lexington, Ky., and Fairfield County, Conn., posted effective rent declines.

New York City’s effective rent rose 1.0% last quarter, while its vacancy rate fell 0.1% to 5.2%. New York has seen rent declines in six of the last ten quarters, but its effective rent has risen 2.3% in the past year. This places the city in the bottom twenty metros for rent growth.

Like many of these metro markets, healthy job growth continues to fuel demand for New York apartments. The city has added 73,100 jobs in the last year at a 1.7% growth rate. The U.S. has added 207,000 new jobs on average each month over the past eight months, up from an 189,000 average increase in the first months of 2017. Orlando, San Bernadino-Riverside, Calif., Colorado Springs, Colo., Austin, Texas, and Dallas have posted the highest year-over-year job growth, and no metros have shown any job loss.

By Mary Salmonsen

Apartment Construction Boom Fuels Downtown Phoenix’s Metamorphosis

Downtown Phoenix was like many urban cores across the country during the Great Recession. Dilapidated buildings served as the backdrop to an area infested with drugs, crime and homelessness. Employees rushed home to their suburban oases after work, leaving a ghost town in their wake. Locals shuddered at the thought of residing in downtown.

Fast-forward to present day and Downtown Phoenix’s narrative has changed dramatically. Fervent demand for housing in the urban core is keeping multifamily developers increasingly active. More than 4,500 units have delivered here since 2015, expanding inventory by nearly 18 percent.

After Tempe, the Downtown Phoenix submarket, which includes Midtown, has the most projects in the pipeline of any metropolitan submarket. Roughly 4,000 units were under construction at the end of September.

The new luxury units inundating downtown are leasing at a rapid clip. This year has been particularly strong as nearly 1,000 units delivered and more than 1,400 units were absorbed, compressing vacancies by 180 basis points. If this trend holds, it would be the first year vacancies have dipped since the construction boom began in 2015.

Downtown Phoenix has received around $5 billion in public and private investment in the past 12 years. The Metro Light Rail, the biggest mass transit project in the city’s history, has 20 stops running from Midtown to Downtown. The Phoenix Convention Center underwent a much-needed expansion and tripled in size, making it one of the biggest convention venues in the nation. Arizona State University, the University of Arizona and Northern Arizona University each have built campuses in downtown in the past decade.

The pivotal project in downtown’s evolution as a true live/work/play environment may have been CityScape. The mixed-use development’s first phase delivered a 27-story, 604,000-square-foot Class A office tower and 124,000 square feet of retail in 2010. Corporate tenants such as Alliance Bank and United Healthcare occupy large office spaces, as do a number of law firms. As part of the retail component, Lucky Strike Bowling Alley and Stand Up Live have given locals additional entertainment options.

The second phase brought a combined hotel and apartment tower in 2014. Kimpton’s Hotel Palomar occupies the first 10 floors and a total of 242 rooms, while CityScape Residences has 224 luxury apartment units on the upper floors.

Block 23, CityScape’s third phase, will deliver 230,000 square feet of creative office space, a 45,000-square-foot Fry’s Grocery and 300 apartment units. The third phase broke ground in the fourth quarter of last year and is slated to deliver in the summer of 2019.

Today, a buzz is in the air when you walk through downtown Phoenix. Old buildings have been replaced with high-rises and young professionals and students fill local bars and restaurants. According to the Downtown Phoenix Partnership, in the past decade about 100 new restaurants have been added, 12,000 live music and theater seats are in the area and 12,000 college and graduate students attend downtown campuses.

Multifamily developers will continue to play a large role in the ongoing transformation of downtown Phoenix. From Roosevelt Row to the Warehouse District, Millennials are driving a cultural shift toward urban living. This year’s uptick in apartment demand is a good sign not only for developers, but all of Phoenix.

By Mike Petrivelli

Almost 90% of new metro Phoenix apartments are luxury, requiring hefty rents

Metro Phoenix’s apartment boom is a pricey one.

About 87 percent of all the new rental complexes to go up in the Valley in 2017 and this year are luxury apartments, according to new survey.

Renters looking for apartments they can afford in the Phoenix area won’t be surprised by that statistic. Many of the new complexes to dot central Phoenix and Scottsdale come with rents of higher than $1,500 a month — that’s a mortgage payment for many of us.

Building luxury

Metro Phoenix ranks in the top one-third of U.S. cities for the most luxury apartment construction in recent years, according national apartment research and listing firm RENTCafe.

Renters looking for new, affordable apartments do have it tougher in Las Vegas and St. Louis, where 100 percent of all the new complexes to go up since the end of 2016 have been luxury properties.

RENTCafe defines luxury as complexes considered class B+ properties or better. Rents at class A, the highest-end complexes, are typically much higher than an area’s average apartment rent.

Rents still climbing

Apartment rent increases slowed down a bit in the Valley this year, due to more competition from the new complexes.

But the average rent for a Phoenix two-bedroom apartment still climbed 2.6 percent over the past year. That’s almost three times the national average increase, according to another national researcher, ApartmentList.

And Valley apartment rents climbed rapidly at not only new complexes but also older ones during the past few years.

Valley rents by city

A look at median rents for a two-bedroom apartment, and how much costs have increased in the past year:

  • Gilbert: $1,420, up almost 3.5 percent.
  • Peoria: $1,400, up 4.2 percent.
  • Surprise: $1,360, up 1 percent.
  • Chandler: $1,360, up 3.9 percent.
  • Scottsdale: $1,300, up 2.6 percent.
  • Avondale: $1,220, up 1.4 percent.
  • Tempe: $1,160, up 3.5 percent.
  • Glendale: $1,130, up 3 percent.
  • Mesa: $1,080, up 2.7 percent.
  • Phoenix: $1,050, up 2.6 percent.

What’s affordable?

Metro Phoenix renters need to earn about $19.50 an hour to afford a decent two-bedroom apartment, and earn much more for the Valley’s newest apartments.

The typical Valley renter earns $17.59 an hour, according to the latest study from the National Low Income Housing Coalition.

While most of the new apartments going up in metro Phoenix aren’t affordable for many, Thomas Brophy of Phoenix-based ABI Multifamily said most of the rental complexes in the area went up before 1990 and are more affordable.

About 240,000 of the Valley’s apartments were built before then.

About 26 percent of all metro Phoenix apartments are considered luxury, according to RENTCafe. That’s just above the national average of 23 percent.

By Catherine Reagor