Another banner year is anticipated for Phoenix.
In a recent survey of commercial real estate investors, Phoenix was ranked as a top target, securing the 8th spot among the most preferred U.S. metros, according to CBRE’s 2023 U.S. Investor Intentions Survey. [1]As one of the most populous cities in Arizona, Phoenix plays a pivotal role in the state's real estate market. In 2024, Phoenix's population reached 4,777,000, marking a 1.27% increase from 2023.[2] As one of the fastest-growing cities in the country, the greater Phoenix area is teeming with opportunities.
The city's diverse and expanding population attracts a myriad of businesses and residents. From high technology to education and health services, let’s explore some of the key industries flourishing in Phoenix.
Phoenix has been experiencing steady economic growth for decades, and recent trends suggest this will continue. Here's a breakdown of some key factors driving this growth:
Gone are the days when Phoenix was merely a construction boomtown. Unlike the prolonged recovery after the Great Recession, Phoenix metro has outpaced other competitive metros in recovery post-pandemic.
| Rank | 2006 | 2020 |
| 1 | Chicago | Chicago |
| 2 | Los Angeles | Los Angeles |
| 3 | Dallas | Dallas |
| 4 | Seattle | Phoenix |
| 5 | Minneapolis | Atlanta |
| 6 | San Francisco | Miami |
| 7 | Detroit | Philadelphia |
| 8 | Atlanta | Minneapolis |
| 9 | Philadelphia | Detroit |
| 10 | Miami | New York |
| 11 | New York | Houston |
| 12 | Phoenix | Boston |
| 13 | Boston | Seattle |
| 14 | Houston | San Francisco |
| 15 | Washington | Washington |
Source: Hachman Index
Phoenix has experienced significant economic development over the last decade, transitioning into a diverse and welcoming economy. Today, it is recognized as a burgeoning nexus for technology, medical, and high-tech manufacturing sectors. This evolution efforts to grow the metro area have gone beyond traditional demand drivers like the state government, Arizona State University, and the construction industry.
Source: U.S. BLS, Local Area Unemployment Statistics
Metro Phoenix is ranked No. 2 among U.S. areas to watch for growth[4], commercial real estate development, and investment in 2024.
Phoenix is the capital and a major hub for business and tourism in the Southwest[11]. It boasts a strong real estate market with a diverse range of housing options, making it an attractive option for both personal and investment properties[12]:
Population: 1,660,000
Change in the population (since 2020): 1.56%
Home value: $394,870
Change in home values (5-year): 70.3%
Median rent: $2,199
Rent change (year over year): 1.0%
With a strong population base, rising home values, and a strategic focus on multifamily units to cater to the city’s growing demand, Phoenix is setting the standard for urban growth and investment appeal.
Investment share of Multifamily in Real Estate, U.S. (2023 Investor Intention Survey)
Source: CBRE: 2023-us-investor-intentions-survey.pdf
Demand & Supply
For the first time in many residents’ lifetimes, metro Phoenix is poised to deliver nearly enough multifamily units to meet annual demand. The projections for 2024 make 2023 look like a warm up lap. Phoenix could nearly double its delivered unit count with an estimated 33,817 [13] expected this year.
Having spent several years where units delivered equaled around half the number needed to meet demand in any given 12-month calendar cycle, the massive spike in demand during and after the pandemic, coupled with still exceptionally low-interest rates, finally fueled developers to start churning dirt and building in significant volumes. Phoenix had an unemployment rate of 6.5% in 2020 when more than 9,000 of the city’s residents filed for bankruptcy. Phoenix’s unemployment rate has since dropped to 3.2%. The state’s economy grew by 6.3% in 2021,[14] the most in 16 years.
|
Supply (in units) |
|
|
Dallas |
38,000 |
|
Phoenix |
33,362 |
|
Austin |
32,319 |
|
New York |
26,916 |
|
Denver |
22,192 |
|
Charlotte |
22,363 |
|
Los Angeles |
22,055 |
|
Atlanta |
21,909 |
|
Houston |
21,534 |
|
Raleigh |
20,194 |
|
Demand (in units) |
|
|
Dallas |
36,952 |
|
Phoenix |
35,824 |
|
Austin |
33,500 |
|
Los Angeles |
31,597 |
|
DC |
23,664 |
|
Charlotte |
22,183 |
|
New York |
22,075 |
|
Atlanta |
21,985 |
|
Newark |
21,629 |
|
Denver |
20,800 |
Source: Real Page Market Analytics
HVS forecasted occupancy in Phoenix to stabilize in the upper 60s in 2023 and rebound to around 70% in 2024, similar to 2018/19 levels. ADR growth is expected to be strong in 2024, notably above the national forecast, and remain stable in 2024 despite the absence of events like the Super Bowl.
Phoenix's robust economic transformation, driven by a combination of diversified commercial growth, significant investments in the tech and hospitality sectors, and proactive city planning, places it in a strong position for continued growth and investor interest. The city's ability to attract major events and key industries, alongside its commitment to developing its real estate market, underscores its potential as a top market for investment and economic development in 2024 and beyond.
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