Phoenix Apartment Demand Outpaces Supply as Concessions Deepen, CoStar Says
PHOENIX, ARIZONA, OCTOBER 27, 2026 — Apartment demand in metro Phoenix is outpacing new supply for the first time since 2021, but asking rents remain negative and concessions at newer properties keep getting larger, according to CoStar's 2027 outlook for the Phoenix commercial real estate market.
Connor Devereux, Senior Director of Market Analytics at CoStar, presented the outlook on October 27, 2026, describing an apartment market at an inflection point, still weak but improving after three years of deterioration. Figures in this article come from CoStar unless otherwise noted.
Demand catches up with supply
Phoenix absorbed more than 22,000 apartment units over the 12 months ending in the third quarter of 2026. Before the pandemic, the market typically absorbed 7,000 to 9,000 units a year.
The rebound follows a long stretch of oversupply. From 2022 through mid-2025, about 84,000 units were delivered in Phoenix against about 48,000 units of demand, an imbalance Devereux tied to the falling rents, elevated vacancy and heavy concessions of the past several years. Through the first three quarters of 2026, demand has again run ahead of new supply.
Vacancy peaked above 12% in late 2025 and has since improved to about 10.5%. Devereux said the recovery now reaches stabilized communities, not just properties in lease-up, though he does not expect a return to double-digit rent growth.
Rents: better, not good
Annual asking rents fell 2.9% at the end of 2025 and were down about 1% as of the third quarter of 2026. Even so, 2026 is tracking ahead of each of the previous three years at the same point on the calendar. Those years finished at -1.0% in 2023, -1.5% in 2024 and -2.9% in 2025.
CoStar expects 2026 to close between 0% and -1%, which would mark a fourth straight year of negative asking rent growth. For perspective, Phoenix asking rents grew about 5% a year from 2015 to 2019, a pace Devereux said the market remains well behind.
Concessions get deeper
About 73% of Phoenix apartment properties offered a concession as of August 2026, compared with 42% nationally. In 2021 and 2022, fewer than 10% did. Devereux attributed the gap to Phoenix's standing as one of the most aggressively built apartment markets in the country.
The offers are also getting richer at newer properties. Among Phoenix communities with at least 100 units built since 2023, eight weeks free was the most common advertised concession in September 2025. By March 2026, 10 weeks or more had taken the top spot, and by September 2026 it was clearly dominant, particularly in areas with heavy new construction such as downtown Phoenix, the Southwest Valley and Deer Valley.
Tracking the same properties from September 2025 to September 2026, 51% increased their advertised concession, 26% held it steady and 23% lowered it.
Devereux said concessions are spreading to stabilized communities as well and could be slow to burn off even as asking rents begin to rise.
Capital markets slow multifamily sales
The 10-year Treasury yield has risen more than 100 basis points in 2026, and the ICE BofA MOVE Index, a widely watched gauge of bond market volatility, has climbed back above 100. Devereux said uncertainty over where rates go next is weighing on sales activity even more than the level of rates themselves.
Phoenix commercial real estate sales volume totaled $13.0 billion over the trailing 12 months through the third quarter of 2026, down 6% year over year but up 42% from the first quarter of 2024. Multifamily led the slowdown, with sales volume falling 23%, from $4.5 billion in 2025 to $3.4 billion over the trailing 12 months. Its share of the market has shrunk as a result: multifamily made up 46% of Phoenix sales volume from 2015 to 2019 but 26% over the past year, while industrial's share rose from 15% to 41%.
Financing conditions have also tightened. The National Multifamily Housing Council's survey released in October 2026 showed both equity and debt financing becoming less available than three months earlier.
2027 outlook
Population and job growth in Phoenix have slowed and are expected to stay softer, based on CoStar and Oxford Economics forecasts. Housing costs are one offset. Devereux said the expense of buying a home is pushing more households toward renting, noting that the average first-time homebuyer is now about 41 years old, a trend he said should also support renewals.
Apartment demand in 2027 is expected to fall short of 2026's pace. Deliveries, however, peaked in 2024 and are forecast to drop sharply in 2026 and again in 2027. Devereux said supply should ease faster than demand, keeping vacancy on a downward path toward about 9.5% in 2027.
On rents, CoStar's forecast calls for asking rent growth of 1.5% to 2.8% in 2027, which would be Phoenix's first positive year since 2022. The forecast covers asking rents only and does not account for concessions.