By Adam Finkel
I categorize the multifamily market in 2025 as resilient. My outlook for the multifamily market is that it remains a top investment choice due to ongoing housing shortages and strong population growth in markets like Phoenix. The metro has added 13% more jobs since 2019, well above the national average, and continues to attract in-migration. This demand supports occupancy rates and rent growth even as new units are delivered. Builders are adapting with innovative incentives like rate buydowns, which help close the gap between renting and buying. Additionally, Phoenix’s position as a hub for economic and high-income growth reinforces its appeal to both investors and residents.
The multifamily market still faces headwinds, including elevated interest rates and rising costs of ownership, such as taxes and insurance. Phoenix, while growing, has 37,000 units under construction, which could lead to short-term supply pressures, increasing concessions, and slowing rent growth. Developers are also grappling with margin compression due to high land prices, labor costs, and materials, and affordability remains a significant issue for many renters, further challenging the market.
The biggest pain points for the multifamily market in 2025 will be the combination of margin compression and affordability challenges. I see those as among the toughest hurdles. Rising property taxes and insurance costs, along with stagnant or declining rents in certain areas, could erode profitability. Phoenix’s housing supply is aging—40% of its stock is over 30 years old—which makes renovations expensive and further impacts the affordability of rental units. Additionally, navigating a potentially slower rental market as new deliveries come online may put pressure on landlords and investors.
If there is a silver lining for the multifamily sector in 2025, it could be that Phoenix’s strong economic fundamentals will be its saving grace. The city is seeing above-average job growth, high-income household growth, and sustained in-migration—all of which fuel demand for housing. Multifamily absorption rates are projected to keep pace with new deliveries, and the long-term outlook remains positive. Build-to-Rent communities, which have gained traction in Phoenix, present a unique opportunity to bridge the gap between single-family and multifamily living, offering investors solid returns while catering to renter preferences.
Despite concerns about overbuilding, an unexpected surprise in the multifamily market may be that absorption could outpace expectations due to Phoenix’s unique combination of in-migration, job growth, and its status as a high-income growth market. Additionally, while many expect multifamily demand to cool, lower-than-expected deliveries beyond 2025 (6,200 in 2026, fewer in 2027) could create a supply crunch sooner than anticipated, giving a second wind to rent growth and property values