Rental scene may be changing – for now - SanTan Sun News SanTan Sun News

Rental scene may be changing – for now

June 21st, 2022 SanTan Sun News
Rental scene may be changing – for now
Community
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By Paul Maryniak
Executive Editor

The rental market both locally and nationally is cooling a bit – but analysts said two weeks ago there might not be much reason to celebrate on either front.

Apartmentlist.com, a nationwide rental listing firm, said trends in apartment vacancies and rent indicate that more empty apartments are entering the market and rent increases are slowing, but that likely won’t remain the case long-term.

And looking at the Phoenix Metro area, the Cromford Report said that even the limited rental data available on the Arizona Regional Multi Listing Service shows that “though the median lease price has increased over the 12 months, far more listings are leasing below the asking price and far more listings are appearing on the ARMLS database.

“Landlords do not bother to list their properties on the MLS if they expect them to lease up very quickly and easily,” the Cromford Report said. “So the fact that we are seeing a 40% increase in new rental listings compared with 2021 shows us that landlords are less confident than they were a year ago.”

Nevertheless, sales of apartment complexes are continuing at a major pace – often at prices that are more than double what they sold for only a few years ago.

The Cromford Report said that in the Valley, nearly three-quarters of the 1,473 leases that closed in May 2021 came in at the asking rental price while 18.3% were below. By contrast, last month saw just over half of the 1,954 closed leases settle at the asking price and 41.6% fall below it.
Still, the median closed lease price last month was $2,200 – higher than the $1,900 median a year ago.

“The rental listings on ARMLS are not a balanced cross-section of the rental market,” the Cromford Report cautioned. “They tend to be skewed towards higher-end properties and single-family homes rather than relatively affordable apartments.”

“Rental prices have not changed a lot in the last five months and the median lease price seems to have hit a stable patch around $2,200,” it said, adding that the 2,385 vacancies reported on June 5 was up 26% from Jan. 1 and 79% form Sept. 1.

Those trends are similar to what apartmentlist.com reported.

“In Phoenix, for example, rents have increased by just 2 percent over the past six months, during which time the city’s vacancy index has gradually eased back to 5 percent, close to where it was before the onset of the pandemic,” Apartmentlist.com said last week.

“After experiencing significant disruption over the past two years, the rental market has begun to gradually stabilize,” it continued. “The markets that saw large spikes in vacancies in the early pandemic have since seen renters return. Meanwhile, demand has started to level off in the nation’s hottest markets. That said, the availability of vacant units nationally remains notably constrained compared to the pre-pandemic norm.

“Even if our national vacancy index continues its gradual easing, it won’t surpass 6 percent until well into next year on its current trajectory.”

Apartment list also said that the rapid cooling of the housing market may have an adverse impact on rental units’ supply and, consequently, rates.

“There are factors at play which could present headwinds to that easing,” it said. “Although we’re now at the start of the busy season for the rental market, when the bulk of moving activity normally takes place, rapidly rising rents may incentivize many renters to stay put and renew existing leases rather than looking for new ones.

“At the same time, the recent spike in mortgage rates has created yet another barrier to a historically difficult for-sale market, potentially sidelining would-be homebuyers and keeping them in the rental market. Given these factors, it’s possible that the easing of our vacancy index could level off in the coming months.”

In Mesa, six complexes and one condo community changed hands in the last four weeks in deals totaling $459 million.

The biggest deal involved the $142-million sale of the 460-unit Indian Springs Apartments on South Stewart, near Southern Avenue and Alma School Road, by California-based Open Path Investments to Rise48 Equity of Phoenix, according to Valley real estate tracker vizzda.com.
Built in 1985, the complex consists of 25 buildings, three pools and basketball/tennis court, three laundromats and a club house on just under 10 acres.

The sale equaled a per-square-foot price of $723 and a per-unit price of $308,685, vizzda said.
Last week, California-based TIC Group shelled out $125 million for the Talise Apartments, a 388-unit complex, built in 1984, on Gilbert Road and University Drive.

Another big transaction also saw Rise48 Equity buying the 288-unit The Nolan on W. Broadway Road for $92 million. Northmarq Phoenix said its investment sales team ’s investment sales and debt and equity teams represented the buyer.

The sale price was more than three times greater than the $30 million that seller Benedict Canyon Equities paid for the 36-year-old complex in 2018,

The gated complex comprises 18 two-story residential buildings, three pools and a clubhouse on 12.3 acres. Vizzda said the sale broke down to a per-unit cost of #319,444.
Rise48 Equity plans to renovate the interiors of all the units at The Nolan, Northmarq said in a release.

“Rise48 has purchased over 1,000 multifamily units in Arizona since the start of 2022, and over $1 billion in transactions since 2019,” said Brandon Harrington, a member of Northmarq’s debt and equity team. “They continue to seek out well-positioned communities with value-add opportunities through improvements to the individual units and the complex amenities.”