Phoenix's Multifamily Delivery Cliff

Along with the other Sunbelt markets, Phoenix has seen record apartment deliveries in 2024 and 2025. The multifamily market in Phoenix has not seen this much development activity since the 1980s. 

There are a number of factors responsible for the spike in deliveries. The pandemic-related supply chain delays caused the planned orderly deliveries of 12,000-15,000 units per year to be pushed back and then compressed into 2024 and 2025. The 15% rent growth in 2021 (see the second graph below) coupled with extremely cheap debt allowed almost any new project to pencil.

All and all, Phoenix saw 24,000 new units delivered in 2024, and 21,000 are expected to be delivered throughout 2025. And while these deliveries have been met with record absorption, this has put pressure on the existing supply. With so many properties being leased up, we’ve seen concessions go from 1 week or less, all the way up to 10+ weeks in certain submarkets. Stabilized vacancy has increased from a reliable 5%, up to 7%+. Rent growth turned negative for the first time in 15 years. 

THE TIDE IS TURNING

However, the conditions are in place for the tide to change very soon. Delivery volume is predicated by the volume of starts, and taking a look at CoStar’s analysis reveals that construction starts in Phoenix MSA are down significantly from their peak in 2022 and 2023.

The construction start data allows experts at CoStar to forecast the delivery pipeline over the coming years. As you can see in the following graph, deliveries are set to significantly decrease starting as soon as next quarter, Q1 of 2026. The industry has coined this coming drop off “The Delivery Cliff”, and it’s easy to see why. 

While the market expectation is that the impact of all of these deliveries will take 9-12 months to fully flush out, since it takes time to lease-up and stabilize properties, we’ll likely see operational improvements much sooner. Even if we assume 0% rent growth in 2026, just getting vacancy and concessions back to long term averages will have a significant material impact to cash flow and property valuations. 

Once the new construction is absorbed and stabilized, the market will be poised to see strong rent growth, which is why groups like CoStar are predicting nearly 20% growth in the next 5 years. And it’s why we’re excited to be buying again, after sitting out the last 2 years.