by Jesse Fisher
Recent news and industry reports have painted a telling picture of the Arizona rental market as the state navigates a changing economic landscape in the middle of 2024. As rental rates, vacancy rates, and tenant demand remain crucial benchmarks for real estate investors, understanding the underlying trends is essential for anyone looking to grow or maintain a rental property portfolio in the Grand Canyon State.
Arizona’s rental landscape is experiencing what many observers are calling a “correction phase.” After explosive rental growth during the pandemic years, when both Phoenix and Tucson routinely ranked among the hottest rental markets nationally, the pace of rent increases has significantly moderated. According to new data released this week by Zumper, the median rent for a one-bedroom apartment in Phoenix is now $1,280, up just 1.6 percent year-over-year. That rate is a marked deceleration compared to gains seen in 2021 and early 2022, when annual increases often reached double digits.
In Tucson, the trend of slowing rent growth continues as well. The latest Apartment List report finds that median rents in Tucson are hovering around $990 for a one-bedroom, representing a one percent decrease year-over-year. This mild decline highlights a pattern that’s emerging in Arizona’s rental hubs: after rapid increases, prices are stabilizing or even dipping slightly.
Vacancy rates, which skyrocketed in late 2022 and early 2023 as large numbers of new multifamily units hit the market, are showing signs of normalization but remain above the pre-pandemic average. The Arizona Multihousing Association cited a recent survey showing Phoenix’s Q2 2024 vacancy rate at 9.2 percent, down from a high of 10.5 percent last fall but still well above the 6 percent range typical before 2020. Tucson’s vacancy rate is lower, sitting close to 7 percent, though it also remains higher than historical norms for the area.
For real estate investors, these figures warrant close attention. Arizona’s growth markets thrived on a combination of inward migration and limited new housing supply during the peak of the pandemic. Recent reports from the Arizona Republic and The Business Journal indicate that the dynamic has shifted. A surge in construction, especially in Maricopa County, delivered thousands of new rental units over the past eighteen months. This influx has given renters more options and prompted landlords to compete on price and incentives in certain neighborhoods.
The moderating rent growth and elevated vacancy rates are not confined to just the multifamily segment. Single-family rental operators in Phoenix and surrounding suburbs are facing increased competition as well. Local brokerages report that average time-on-market for rental homes has edged up by 20 percent compared to last summer, and some landlords are offering concessions such as one month of free rent or reduced security deposits.
However, not all submarkets are affected equally. While central Phoenix has seen the largest increase in available apartments, outer suburbs such as Queen Creek and Buckeye are still experiencing robust demand due to ongoing population growth. High interest rates and persistently high home prices are keeping many would-be buyers in the rental market, particularly younger families and recent transplants from other states. Analysts at Colliers pointed out in a mid-June market update that Arizona continues to add more than 90,000 new residents annually, which should act as a long-term buffer for rental demand, even as supply catches up in the short term.
For investors, the Arizona rental market is no longer the easy win it was two or three years ago, but there are still substantial opportunities for those who keep a close eye on property fundamentals and market trends. Renters are seeking value more than ever, so upgrades that enhance convenience, such as in-unit laundry or flexible lease terms, can make rentals stand out. For investors willing to adapt, providing above-average service or targeting amenities tailored to working professionals and families can maintain occupancy and limit costly turnover.
Another emerging trend reported by the Arizona Daily Star is the bifurcation of the rental market between new, higher-end properties and older, less updated stock. Premium Class A developments, especially those completed in the last two years, are holding rents steady even in the face of growing supply. Meanwhile, Class B and C properties are more likely to offer concessions or face downward price pressure as tenants shop around for deals. For investors who own or target more affordable housing, maintaining modern features and responding quickly to maintenance issues will be crucial in preserving marketability.
An important factor to watch is the impact of recently proposed “tenant-friendly” legislation at the state level. Lawmakers have been considering changes related to application fees and security deposit caps. While no major laws have yet been passed, real estate groups are urging landlords to stay engaged as policy could shift if vacancy remains elevated. Any changes could affect cash flow and leasing strategies, especially for smaller investors operating with thin margins.
One aspect that remains supportive for landlords is Arizona’s steady pace of population growth and its strong job market in industries such as tech, healthcare, and logistics. Employers are still expanding in the state, driving organic demand for rentals. Even as vacancy rates rebalance, long-term demographic trends favor continued investment in both single-family and multifamily rentals. This underlying strength is prompting some investors to look past short-term headwinds and focus on longer holding periods and proactive asset management.
The luxury rental market is another sector to monitor. High-end single-family homes, especially those located in Scottsdale, Paradise Valley, and select East Valley suburbs, are still attracting high-income tenants, often from out-of-state. Demand for short-term luxury stays is cooling as travel patterns normalize post-pandemic, but longer-term executive and relocation rentals have held up. For investors in this segment, providing premium services and flexible lease lengths can help maintain healthy occupancy.
Looking ahead, industry analysts expect that the wave of new apartment completions will continue through the rest of 2024 before tapering off by early 2025. As leasing activity absorbs the new supply, vacancy rates are expected to slowly decline, likely resulting in more typical rent growth returning by mid-2025. The Phoenix and Tucson markets will remain competitive, and investors will need to leverage professional management, proactive upgrades, and careful submarket selection to achieve strong returns.
In summary, while the Arizona rental market has shifted to a more balanced environment after several years of outsized growth, the fundamentals remain attractive for long-term investors. Rentals in well-located areas with modern amenities continue to perform well. Meanwhile, submarkets that have seen the biggest influx of new supply may require more inventive leasing strategies and pricing agility. Astute real estate investors can navigate this evolving landscape by closely monitoring rental rates, vacancy trends, and shifts in tenant preferences, positioning themselves for success as Arizona’s dynamic rental market heads into a new chapter.