By Jesse Fisher
The Arizona rental market continues to capture the attention of real estate investors and industry professionals in 2024. New data and news reports published this past week provide valuable insight into the latest trends shaping Arizona’s rental landscape. The state, renowned for its vibrant economy and population growth, remains a focal point in national housing discussions. Fueled by shifting migration patterns and ongoing real estate developments, Arizona’s rental market reveals a complex picture for investors and renters alike.
Rental rates in Arizona have seen notable changes recently. According to an article in The Arizona Republic published on June 13, 2024, average apartment rents in metropolitan Phoenix showed a modest year-over-year increase, although the pace of growth has moderated since the frenetic spikes witnessed at the peak of the pandemic. As of May 2024, the average rent for a one-bedroom apartment in Phoenix sits around $1,410, a figure that suggests relative stability compared to previous years. While this marks a slight yearly uptick, it contrasts sharply with the double-digit surges that landlords and investors enjoyed from 2021 through mid-2022.
In other parts of Arizona, including Tucson and secondary cities such as Prescott and Flagstaff, rental rates have remained either steady or posted incremental rises. Tucson, in particular, recorded average monthly rents of approximately $1,170, according to a recent report by RentCafe also cited this week. While these numbers remain below Phoenix’s averages, there is evidence of gradual growth fueled by out-of-state migration and continued pressure from college student demand.
Several factors are tempering rent growth. As highlighted in the latest segment by ABC15 Arizona on June 11, 2024, the delivery of thousands of new apartments and rental homes across Maricopa County and Pima County over the last two years has expanded supply. That surge in inventory has helped absorb some of the pent-up demand, providing renters with more options and slowing the pace of rent escalation. At the same time, higher interest rates have discouraged some would-be homebuyers from leaving the rental pool, underpinning steady demand even as supply increases.
Vacancy rates across the state have gradually expanded, marking a shift from what had been a fiercely tight market. According to Yardi Matrix data released this week, Phoenix’s multifamily vacancy rate hovered near 7.8 percent as of May 2024. This figure represents a significant increase compared to the historic lows below 5 percent that persisted through much of 2021 and early 2022. Tucson has also seen vacancies inch higher, now averaging around 7 percent. Higher vacancy rates give renters greater leverage and are pushing some landlords to moderate rent hikes, sign leases with concessions, or invest in additional amenities to remain competitive.
However, context is critical when interpreting these numbers. Despite the increasing vacancy rates, Arizona remains in a more balanced or “normal” market compared to the hyper-competitive conditions of the recent past. The supply influx, particularly of luxury rentals and build-to-rent single family homes, was anticipated by local experts concerned about affordability. Now, with more than 10,000 new units coming online in Phoenix alone this year, the softening of rent growth is an expected ripple effect rather than an immediate signal of oversupply.
Demand for rentals remains strong, especially as Arizona continues to attract new residents from higher-cost states. According to a new report by the Greater Phoenix Economic Council released alongside recent Census migration data, Arizona’s population grew by approximately 93,000 residents in 2023. Many of these newcomers are renters, either choosing to stay flexible as they test the local job market or renting by necessity due to high home prices and elevated mortgage rates. Notably, Phoenix remains one of the top destinations in the country for remote workers and young professionals, groups who often prefer rental living for its flexibility and amenities.
For real estate investors, these market signals suggest a time of adjustment but still present opportunity. The era of rampant rent inflation may have passed, but steady, modest gains still characterize most Arizona submarkets. Investors seeking to enter or expand in the Phoenix or Tucson markets will need to pay close attention to both micro-neighborhood trends and property class. Newly constructed Class A properties face more competition and slower absorption, which means investors must be diligent about pricing strategies and consider the possibility of short-term rent concessions. On the other hand, well-maintained Class B and C properties in desirable but less saturated neighborhoods have seen less erosion in occupancy and can continue to deliver consistent cash flow.
Single family rental homes present another bright spot in the Arizona investment landscape. The build-to-rent sector continues to expand, responding to persistent demand from families seeking space and amenities without the burden of a mortgage. As highlighted in a June 10 segment by AZ Family News, communities in cities like Gilbert and Peoria continue to lease up rapidly, often drawing tenants willing to pay a premium for new construction and resort-style features such as pools and fitness centers. The demand for these properties appears robust, bolstered by both population growth and changing consumer preferences post-pandemic.
Investors should also be aware of shifting legislative and regulatory trends. Efforts are underway within several Arizona municipalities to address affordability and fair housing concerns. Measures proposed this year, as reported in the Phoenix Business Journal, include incentives for affordable development and potential rent control discussions. Although statewide rent regulation remains unlikely in the immediate term, local policies could impact property returns or investment strategy.
Market observers agree that increased inventory and rising vacancy rates may persist for the next year or two as current development pipelines run their course. However, the outlook for long term demand remains positive, owing to Arizona’s favorable business climate, steady job creation, and ongoing domestic migration. Those investing in rental real estate, particularly those with a long-term horizon, stand to benefit from the state’s continued growth.
In summary, while the Arizona rental market is experiencing slower rent growth and rising vacancies, these trends bring the market into a healthier balance after an unprecedented run. Strategic investors who understand the interplay between supply, demand, and shifting renter preferences can still unlock attractive returns. Paying close attention to local dynamics, diversifying property types, and adapting to new renter expectations will likely separate successful ventures from those unable to weather the evolving market.
The coming quarters will be defined by adaptation. Landlords and investors who refine their strategies and stay alert to demographic and policy shifts will remain well positioned as Arizona’s rental landscape continues to evolve. By balancing caution with the state’s long-term growth potential, investors can continue to find rewarding opportunities in the Grand Canyon State.