There Is More Than One Phoenix

Last month, we dove into institutional ownership of SFR. Let’s keep looking at some of what those larger investors and developers are up to, and the impact. From a distance, Phoenix real estate markets get a lot of hate in the national press, although it certainly hasn’t always been that way.Contrast that with the fact that once you are actually in Phoenix, there is a lot of opportunity and optimism for development and redevelopment. Phoenix looks like one thing from a distance and something very different up close, and there are two major fault lines: downtown Phoenix versus almost everything else, and single-family rental versus multifamily.

Those fault lines matter because most national commentary treats Phoenix as a single market. It is not. It is a split market, and the divergence is driving very different outcomes depending on where and what you are looking at.

At a national level, multifamily has softened as new supply has caught up with post-COVID demand. Vacancy has moved higher, rent growth has flattened, and landlords have less pricing power than they did two years ago. Phoenix fits that pattern, but in a more exaggerated form. It built faster than most markets and is now working through a more visible supply surge. Real estate cycles do not adjust cleanly. They overshoot, and Phoenix overshot.

From 2021 through 2025, when the national press loved Phoenix, a large volume of new multifamily units were developed across the Valley, heavily concentrated in higher-end products. That supply was built for a specific thesis: continued in-migration, remote work flexibility, and a growing base of renters willing to pay for new, amenitized buildings. Some of that demand showed up, but not all of it, and not at the pace required to absorb what was delivered. The result is a broad multifamily overbuild, with higher vacancy, increased concessions, and downward pressure on rents across much of the market.

Downtown Phoenix is where that imbalance is most visible, but it is not the only place it exists. The entire Valley saw elevated levels of multifamily construction, and the effects are being felt well beyond the urban core. What distinguishes downtown is concentration. It absorbed a disproportionate share of new construction, much of it similar in form and price point, which amplifies the impact. The issue is not simply that there are too many units. It is that there are too many comparable units competing for a relatively narrow renter base. Downtown demand is real, driven by professionals, students, and lifestyle renters, but it is not as deep or elastic as the broader housing market.

A similar dynamic is playing out in Tempe, which functions as a parallel urban node rather than part of the broader suburban market. The concentration of towers around Tempe Town Lake makes the buildout especially visible. Anyone driving by or flying into the airport sees it immediately, a skyline that did not exist at this scale a decade ago. That visibility reinforces the perception of overbuilding, but it also reflects the same underlying pattern: a large amount of multifamily supply, much of it higher-end, coming online at roughly the same time. Tempe benefits from a structural demand base anchored by Arizona State University, which should support faster absorption, but in the near term it is still part of the same supply-heavy dynamic affecting urban Phoenix.

Other lifestyle markets, such as Scottsdale, sit on the same side of the broader divide but behave differently. Scottsdale is not a concentrated urban node in the same way as downtown Phoenix or Tempe. Its development is more diffuse, its demand base broader and wealthier, and its pricing more anchored by ownership markets rather than purely by rents. It participates in the broader multifamily cycle, but it did not experience the same clustered delivery of similar product, and as a result the imbalance is less acute and less visible.

This is why it is fair to say that downtown Phoenix and similar urban submarkets like Tempe are overbuilt in the near term, even as the broader Valley is also carrying excess multifamily supply. Not permanently, and not structurally, but in the context of the current cycle. Supply exceeded demand, and the market is still in the process of absorbing that excess. That absorption will happen, but it takes time, and in the meantime, the leverage sits with renters rather than landlords.

At the same time, the second fault line, single-family rental versus multifamily, is creating a different set of dynamics. These two asset types are related but not interchangeable. Multifamily, particularly newer Class A products, has absorbed the bulk of new supply and is showing the strain across the metro. Single-family rental serves a different tenant profile, often families or longer-duration renters who are priced out of homeownership but still want space, stability, and schools. That segment has not been built to the same degree and remains comparatively balanced, with demand holding up more consistently.

The distinction between these urban nodes and the rest of the metro reinforces the split. Outside of downtown Phoenix and Tempe, the market still reflects the broader multifamily overbuild, but the effects are more diffuse and in many cases already moderating. Supply is spread across more submarkets and price points, and underlying demand, particularly for workforce housing and single-family rental alternatives, is deeper. In many of these areas, the excesses of the last few years have already begun to work through the system. Rent growth may be modest, but occupancy is stabilizing, and the competitive dynamics are less distorted than in the urban core.

This is the split market in action. Multifamily is overbuilt across much of Phoenix, with the most acute pressure in downtown Phoenix and visible urban nodes like Tempe. At the same time, single-family rental and more affordable segments of the market are closer to equilibrium, and lifestyle markets like Scottsdale are following a different, more diffuse path (doesn’t that market always?). Same metro, different realities. Want a deal?You can probably get one if you want to buy a stressed MFR development. But if you're looking for a SFR in a neighborhood, the market is pretty balanced.

The important takeaway is not that Phoenix is broken or overbuilt in a broad sense. It is that timing, location, and asset type matter more here than the headline numbers suggest. Downtown and Tempe will recover as population and employment continue to grow, and the broader multifamily market will rebalance as supply is absorbed. But those adjustments are happening at different speeds, and in some parts of the market they are already well underway.

Phoenix is not one bet, and it really never has been. There are several, and right now they are moving in different directions.