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Top 10 Multifamily Deals In Phoenix Throughout 2022

Angela Gonzalez, Phoenix Business Journal


After more than five years of extremely high transaction volume, the metro Phoenix multifamily market cooled during the last half of 2022. The year ended with 177 transactions (of properties 50 units and larger) totaling 35,526 units and selling for $11 billion, said Peter O'Neil, research director at Northmarq.

Much of that was largely driven by capital markets, said Ryan Andrade, co-founder and principal of Los Angeles-based Tides Equities LLC, which has invested $3.3 billion in multifamily since entering the Valley in 2016. "With the lending space in flux as the industry digests the recent rate hikes, it has made it more difficult for a buyer and a seller to agree on appropriate pricing, thus leading to the reduction in transactions as a whole," Andrade said. That said, the fundamentals of multifamily real estate remain extremely strong in Phoenix, with population growth and in-migration far outpacing development of new supply, and higher mortgage rates creating an additional barrier for potential homeowners to leave the apartment space and move into a single-family home, he said.

Tides Equities bought the biggest single asset of the year, paying $255 million for a whopping 1,012 units in Phoenix.

Multifamily building to accelerate in 2023

Developers will continue to build apartments at an aggressive clip in 2023. O'Neil said he's tracking projects totaling 16,000 units on pace to be delivered in 2023, up from about 13,000 units that were completed in 2022. The accelerating pace of new construction likely will exceed renter demand in the short term, but also help keep pace with the Valley's long-term housing demand growth, O'Neil said.

"Our region is going to continue to attract new residents who will need housing, and in 2023, we will likely see a slowing pace of new for-sale single-family homes as higher mortgage rates will restrict some buying and make the homebuilders more cautious about delivering new homes, particularly in the first half of the year," he said. Monthly rental rates ended the year at $1,616, up 2% for the year, O'Neil said. "This followed a year where rents spiked by more than 27% in 2021," he said. "Rapid gains were recorded throughout all of 2021 and during the first half of 2022." Then rents contracted in both the second and third quarters of 2022, representing the first time O'Neil has seen two consecutive quarters of rent declines since 2010. "We should see a bit of a reversal for the 2022 trend in the year ahead," O'Neil said.


Last year, rent growth was the strongest in the first half and then declined in the second half of the year, he said. "In 2023, we think rents will remain very close to their current ranges in the first half, before posting more modest growth in the last two quarters of the year," O'Neil said. "In total, area apartment rents should advance about 3% in 2023." After reaching an all-time high in 2021, occupancy rates dropped in 2022, ending the fourth quarter at 93.6%, about 250 basis points lower than the cyclical high, but in line with the Phoenix area's 5-year and 10-year average levels, O'Neil said.

Investors looking for discount on peak prices

Fewer deals closing in 2022 might make one think there's less investor interest. "We definitely saw fewer transactions close in 2022 than we did during a record-setting year in 2021," O'Neil said. "There are a series of forces that are resulting in more modest transaction activity in recent months, including higher borrowing costs, some economic uncertainty and an expectations gap." Rather than calling it a decline in investor interest, O'Neil said he's seeing an expectations gap, where sellers expect prices from the peak of the market, while buyers are looking for a bit of a discount from peak levels. Plus, borrowing costs aren't as attractive as they were six months ago, before the Fed started raising rates at a rapid pace, he said. Lenders are offering less aggressive financing than they were earlier in the year, making some of the value-add acquisitions that fueled the market in 2021 more challenging, O'Neil said. "So, it's more of a challenge to get deals to pencil, while current owners see their properties are performing and don't feel they need to move on pricing," he said. Andrade said the continued increase in the population of renters in Phoenix gives his team confidence in both the short- and long-term prospects of multifamily real estate in Phoenix going into 2023. Tides Equities — which currently owns 33 properties totaling 9,880 units in metro Phoenix — acquired three properties in mid-December and has one more in escrow to close in January. "We have become more selective in our acquisitions of late, focusing on properties and submarkets with the most upside, and an additional bias toward properties in familiar locations near our existing portfolio," Andrade said.

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