Top Three Submarkets Seeing Most New Apartment Construction

Camelback / Biltmore Submarket Capitalizing on Upscale Surroundings

The Camelback/Biltmore submarket is situated just north of downtown Phoenix, with Route 51 running down its spine. It encompasses a number of the metro’s luxury resorts and upscale shopping areas, including the landmark Biltmore Resort and Biltmore Fashion Park. In addition, the Valley Metro Light Rail has five stations in the submarket, giving residents additional viable options for commuting.

As of July 2017, this submarket has the most units in the pipeline with roughly 3,000 units underway. New construction has been heavily concentrated at the top end of the market – more than 80 percent of the in-development units are 4 & 5 Star rated.

Relative to other construction-heavy submarkets such as Tempe and Chandler/Gilbert, projects tend to be slightly smaller in size. For example, the 4-Star, 225-unit Alta Midtown is representative of the development pipeline here, and initial rent offerings are about 40 percent above the submarket average.

ASU Continues Boosting Demand Among Younger Renters While Financial and Tech Firms Keep Bringing Jobs to Tempe

Tempe has been a focal point for apartment developers this cycle. New construction is heavily concentrated at the top end of the market, with 96 percent of total units added since 2015 falling in the 4 & 5 Star range. Moreover, the supply wave shows no signs of letting up in the near term.

As of July 2017, approximately 2,700 units are under construction in Tempe, half of which are slated to deliver in the last half of 2017. The elevated level of construction that has become the norm here is expected to continue through at least 2018.

Arizona State University provides a strong presence of 20- to 34-year-old renters due to inelastic apartment demand from students. Strong growth in office-using employment also boosts demand for high-end product, and virtually all units under construction are 4 & 5 Star quality. Several major financial services firms including State Farm, Farmers Insurance and Northern Trust have completed large, regional corporate expansions in the Tempe submarket. Furthermore, new announcements of relocations keep coming. Software company ADP expanded its Arizona operations significantly by opening a new office in Tempe in the spring of 2017 in a move that is expected to create 1,500 new jobs.

Population Boom in Chandler / Gilbert Submarket Driving Continued Multifamily Development

Elevated levels of new supply appear to be here to stay in Chandler/Gilbert.

As of July 2017, approximately 2,200 units were under construction here. Roughly 12 percent of the apartments added to the Phoenix metropolitan area over the past five years were located in Chandler/Gilbert. Under construction projects set to deliver in the last half of 2017 include 4-Star, 307-unit Town Commons; the 4-Star, 256- unit Broadstone Gilbert Heritage and the 5-Star, 192-unit Brio on Ray.

Both Chandler and Gilbert are in the midst of revitalizations to their respective downtown areas. Alongside impressive job growth, the submarket’s recent demographic trends have been strong across the board. From 2010-2016, Chandler/Gilbert posted the second-strongest population growth (14%) and the fourth-strongest growth in the prime renting cohort aged 25-34 (14%) out of the 23 Phoenix submarkets. In the same time frame, median household incomes rose by 14 percent to about $81,000, now 30 percent above the metro-wide median
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