The Phoenix multifamily market is in the midst of a dynamic period defined by record-setting absorption, strong rental demand, and evolving development patterns. Against a backdrop of shifting national housing trends, the metro is seeing robust activity in both traditional apartment construction and the fast-growing build-to-rent (BTR) sector, particularly townhome-style communities that blend density with privacy.
Absorption: A Record-Setting Pace
Nationally, apartment absorption surged to unprecedented levels in Q2 2025, and Phoenix was among the markets contributing to this record-breaking performance. CBRE Research reported net absorption of 188,200 units nationwide in Q2, a 44% year-over-year increase and the highest second-quarter figure on record. Phoenix joined 66 other tracked markets in recording year-over-year absorption gains, underscoring its appeal to both renters and investors.
For the fifth consecutive quarter, leasing activity outpaced new deliveries nationwide, with more than two units leased for every new unit completed in the latest quarter. This demand surge is helping push vacancy rates down after several years when supply growth outpaced leasing. The rolling four-quarter net absorption now stands at 665,000 units, just 5% shy of the all-time high.
Demand: Sun Belt Headwinds and Phoenix Resilience
While the U.S. multifamily market is stabilizing, performance varies widely by region. The Sun Belt has borne the brunt of the recent construction wave, leading to elevated vacancies and subdued rent growth in some metros. However, Phoenix continues to show resilience, benefiting from strong in-migration, a diversified economy, and relative affordability compared to coastal markets.
In Phoenix, demand is also bolstered by housing market dynamics. With mortgage rates near 7% and home prices historically high, many would-be buyers—especially millennials—are remaining in the rental market longer. This mirrors a national trend where high ownership costs are pushing households toward rental options, including apartments and single-family rentals.
Development Trends: From Peak Supply to Moderation
After 2024’s 38-year high of 608,000 multifamily completions, national deliveries are slowed in the early part of 2025 – but may be picking up again. Completions in the first half of 2025 were down 25% year-over-year, signaling the start of a more sustainable supply pipeline. Still, some metros—including Phoenix—remain active development hubs.
While developers had hoped for a more pronounced slowdown to help lift rent growth, construction activity remains volatile. RealPage reports that the U.S. multifamily market is set for a record year in 2025, with 525,000 to 600,000 new units expected to deliver as projects from the 2021–2023 boom come online, even as construction starts fall sharply—now about 40% below their 2022 peak.
Demand remains strong, though rent growth is projected to moderate to around 2–2.2% and vacancy rates may rise slightly to 6.2%, particularly in high-supply Sun Belt and Mountain West markets. While investor sentiment is cautious, high home prices and mortgage rates continue to drive renter demand, and rising permit activity signals longer-term confidence. Overall, 2025 is expected to mark the peak of the supply wave, setting the stage for a leaner construction pipeline and market normalization heading into 2026.
For Phoenix investors, this transition period may offer opportunities to acquire assets below replacement cost, especially in submarkets where supply surges have temporarily softened rents.
Growth Drivers: Migration, Affordability, and Lifestyle Shifts
Phoenix’s growth story is closely tied to demographic and economic trends. The metro continues to attract residents from higher-cost states, lured by its relatively lower housing costs, expanding job market, and quality of life. The tech sector’s growth, infrastructure investment, and the city’s role as a logistics hub all contribute to sustained population inflows.
On the renter side, lifestyle preferences are evolving. Many residents—particularly younger households and empty nesters—are prioritizing flexibility, amenities, and location over ownership. The stigma once associated with long-term renting has largely disappeared, creating durable demand for well-located, high-quality rental housing.
The BTR Sector: Townhome Communities Gain Momentum
Within Phoenix’s broader rental landscape, the build-to-rent (BTR) sector—especially townhome-style projects—is emerging as a defining growth segment. Nationally, BTR stock is projected to make up 8–11% of future rental deliveries, and Phoenix is one of the key markets attracting institutional capital.
BTR communities appeal to a wide demographic: families with children or pets, remote workers seeking extra space, and renters by choice who want the feel of a single-family home without the mortgage commitment. Townhome designs, in particular, strike a balance between density and privacy, making them attractive to both renters and developers.
According to Walker & Dunlop, 35% of BTR inventory consists of townhomes, with features like private garages, individual entrances, and fenced yards. In Phoenix, these communities often locate in suburban or infill settings where land costs and zoning allow for higher-density layouts than detached SFRs, but still provide the autonomy renters want.
Institutional investment is accelerating this trend. In one high-profile move, Blackstone entered a $300 million deal with NexMetro Communities to recapitalize a BTR portfolio in Phoenix and Denver. These partnerships are shaping the next generation of rental housing, where amenities, community integration, and operational efficiency are as important as square footage.
Outlook: Phoenix Positioned for Continued Strength
The Phoenix multifamily market’s near-term trajectory will be shaped by how quickly the development pipeline moderates and whether demand continues to absorb new supply at its current pace. National forecasts suggest vacancy could dip below 8% by the end of 2025, with modest rent growth in the 1.5–2% range.
The combination of strong in-migration, a diversified economy, and a growing BTR townhome segment positions the Phoenix metro for stability and long-term growth—even if short-term rent growth remains muted in certain submarkets with heavy deliveries.
As affordability challenges in the for-sale housing market persist, more households are expected to remain renters by necessity or choice, ensuring steady demand for multifamily and BTR housing alike. For investors and developers, the opportunity lies in aligning product type, location, and amenities with the preferences of today’s—and tomorrow’s—renters.