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Surprise! Surprise Beats Phoenix in the Rent Growth Race, and So Does Most of the Metro

The desert climate doesn’t seem to help set Phoenix apart from the rest of the nation, in that the cores of big US metros are cooling off, unlike cities on the outer edges of the urban rings, where the rental heat maps are starting to glow red hot. Phoenix rents have reached $889/month in December, while the metro area average crept up as high as $968/month by the end of last year—increases of 24% compared to the averages from 3 years ago, according to Yardi Matrix apartment data.

Phoenix outpaced by the metro in rent growth

Much like in the case of Atlanta or Los Angeles, Phoenix rents have been growing at a steady pace for at least the past three years, but other cities in the Valley of the Sun have shown big deflections. These have canceled each other out for the most part, resulting in about the same growth rate as in Phoenix proper, but what’s really interesting is that the metro’s average rent is almost $80 above that of Phoenix. No worries though, because both are still far from the US average—$242-far in the metro’s case and $321 in Phoenix’s, to be specific.

Phoenix Average Rent 2014 to 2016

The surging population coupled with a healthy job market resulted in growing demand for Phoenix apartments, and it’s well-understood that competition does no good for bargaining power. In fact, renters in the whole Phoenix Metropolitan Area are victims of that phenomenon right now, as rents hit record levels in 2016. Phoenix itself posted a strong 7.1% year-over-year rent increase, which is a lot higher than the 4% national average, but apparently that was only enough for a confident middle-rank on home turf.

Phoenix rents - Metro Area Average Change in Rent from 2015 vs 2016

Rents in most cities of the metro increased by at least 5%, but Goodyear had really gone overboard last year with an 8.4% increase, not to mention, Glendale (8.8%) and  Mesa (9.1%).
And see that wine spot there on the map?
[bctt tweet=”Surprise stayed true to its name in 2016 and startled its renters with a double-digit growth rate!” username=”RentCafeapts”]

This interactive chart shows Phoenix Metro’s cities in descending order by Y-o-Y rent growth:

Aggressive rent growth—is affordability in danger?

Well, yes and no. Some of the already pricey cities have managed to pull off a strong rent growth, such as Avondale (6.5%), but that’s not outstanding, at least not in the Phoenix area. It was mainly the “cheaper” cities (those where the average rent is below that of the metro) that pushed the pedal to the metal. A high number of completions is one of the factors that keep rents in check in the popular neighborhoods—about 2,900 new units have come online last year only in Phoenix, and Yardi Matrix reports that more than 3,500 units are in the pipeline for the months to come. This we cannot say about Surprise, though, where cranes are nowhere to be seen, and the lack of new supply has driven the average rent to $1,025, up by a painful $115 from December 2015.

The priciest Arizona city for renters is Scottsdale, where rents averaged $1,254 at the end of the year, but the 1.9% growth is a relatively modest rate. The limited headroom is one of the possible reasons for the sluggish increase, but the 1,641 units that have been delivered last year also slammed the brakes on rent growth for sure. The area, however, is likely to see stable increases for years to come, as SkySong, the 42-acre ASU Scottsdale Innovation Center alone is expected to create up to 10,000 jobs as it gains momentum. Actually, add 8,000 to that, because that’s how many new positions State Farm’s $700 million Marina Heights regional headquarters will eventually create a couple of blocks down in Tempe.

Although Chandler came closer to the lower end of the list by year-over-year change, it’s in the top 3 by average rent! Then again, this is probably a temporary state as Intel has just announced its plans to invest north of $7 billion to complete what will be the world’s most advanced semiconductor factory, creating more than 10,000 new positions within a couple of years as a pleasant side-effect.
And surprise: anybody seen Surprise? Exactly. Despite the explosive growth rate, its average rent of $1,025 puts it at equal distance from both extremes of this list:

Phoenix Metro Area top Least and Most Expensive Cities 2016

From the right side of the table, Glendale is the one that seems most out of place—but it will probably not be there for long. Currently much of the work in the West Valley, where Glendale is located, is in relatively low-wage occupations, but the city is actively luring businesses to the area. In fact, more than a dozen companies have either moved to Glendale or expanded in the city this year, and 2.8 million square feet of commercial space is underway as we speak. The effects are already palpable on the rental market (remember that Glendale showed the 3rd largest growth rate in the metro, at 8.8%).

As a conclusion, temporary fluctuations will certainly nettle renters, but affordability is not likely to suffer at the end of the day, so long as the vigorous rent growths come hand-in-hand with a good influx of high-paying jobs.

Check out this interactive table to see where your city stands in terms of rent growth and average rent prices:

CityAverage Rent
Average Rent
Units Delivered
Phoenix$889$8307.1% 2,877
Chandler$1,091$1,0335.6% 1,290
Tempe$1,175$1,1145.5% 1,396
Scottsdale$1,254$1,2311.9% 1,641

The trend continues inside the boundaries of Phoenix proper

Central Phoenix is holding its horses; in zip code 85034 the average rent even decreased by 3.4%—although much of it is in fact the airport and the surrounding industrial developments, with a limited amount of rentals.

Meanwhile, outer neighborhoods seem to have picked up heat radiating inwards from the surrounding cities, such as zip code 85018 (part of Camelback East Village), which clearly has more to do with Scottsdale than Phoenix, being a suburb right next to Scottsdale’s core, which is booming with activity right now. Zip code 85043 (Estrella Village) is again quite far from the city center, close on the other hand to the industrial district which has “JOBS” written all over it—the area is home to facilities like the huge Amazon Fulfillment Center, to name just one of the largest players.

Note that although the large dark orange cluster northwest of Downtown (comprising suburbs like North Mountain Village, Alhambra, all the way to Maryvale Village) is technically part of Phoenix, it’s much rather Glendale’s gravitational field, which was up there on the top shelf with an 8.8% rent growth rate.

Other than that, the increasing demand in the Desert View Village neighborhood (which we affectionately call zip codes 85050 and 85054), led to the appearance of two new rental communities, 56 North Apartments and Alta Paradise Ridge in 2016, adding more than 600 new units. This inventory growth was enough to tame rent growth and even apply a slight downward pressure.

Source: Rent prices are actual rents in multi-family properties of 50 or more units, from Yardi Matrix, a RentCafe sister company.

Fair use and redistribution

We encourage you and freely grant you permission to reuse, host, or repost the images in this article. When doing so, we only ask that you kindly attribute the authors by linking to or this page, so that your readers can learn more about this project, the research behind it and its methodology.

Balazs Szekely
Balazs Szekely
Balazs Szekely is a qualified journalist with extensive experience as a real estate writer for several Yardi publications. He has covered a wide range of housing issues and real estate news as a creative writer for RENTCafé. Balazs holds a B.S. in Journalism. You can connect with Balazs via email.

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