Multifamily housing in the Valley is multiplying

In a region more accustomed to spreading out rather than up, the Valley is seeing an increase in the construction of multifamily housing, mostly due to recovery from the Great Recession.

“A couple of reasons for the increase in multifamily development are that from 2008 through 2012, we saw little to no new development of new apartment communities, so there was a clear need for communities,” said David Fogler, an executive managing director the Southwest Multifamily Advisory Group at Cushman & Wakefield’s Phoenix office. “In addition we have seen a demographic shift (both locally and nationally) that has led to a demand for well-located, urban type multifamily housing within walking distance to entertainment, shopping and employment.”

Fogler said Cushman & Wakefield began seeing an uptick in multifamily home construction in 2012-2013

According to a report by Fannie Mae, since 2012, approximately 29,000 apartment units were delivered in the Valley, mostly in Chandler, Gilbert, Tempe and Mesa. There are an additional 14,500 units underway, representing an estimated 4.2 percent increase in inventory for this year. The largest of these is the Pacific Proving Grounds North Community Plan in Mesa, which will deliver an estimated 3,500 units in 2019.

“Most real estate professionals see the current market as very active, but most would not necessarily describe it as a boom,” Fogler said. “While certain submarkets such as Downtown Phoenix, Tempe and Midtown Phoenix are seeing a significant amount of new development, other areas such as the West Valley are seeing very little new development. Compared to previous cycles, the amount of new supply is really not out of line with demand.”

Yes, more people are moving to the Valley than they were during the Great Recession, but that number is still below the population growth the region experienced before the economic collapse, said local economist Elliott Pollack, CEO of Elliott D. Pollack and Company, an economic and real estate consulting firm in Scottsdale. The demographic shift, however, is playing a role in the increased need for multifamily housing.

“A lot of baby boomers have sold their homes and are living in upper-end apartments and use the money they had in their homes to support their new lifestyle,” Pollack said. “Also, because millennials are getting married roughly seven years later than baby boomers did, that means they’re going to be in apartments for a lot longer.”

While the current increase in multifamily home construction may not be a boom, it has certainly helped subcontractors such as Paul Johnson Drywall (PJD).

“Business is definitely good for Paul Johnson Drywall,” said company president Robert “Cole” Johnson. “We are seeing significantly increased demand for our services, and like other subcontractors, have serious potential for growth opportunities.”

Boom or not, the increase in multifamily home construction is testing the area’s labor pool, a situation PJD is actively addressing.

“Since 2016, we have successfully hired 1,500 skilled W-2 workers,” Johnson said. “In addition to recruiting experienced drywall crews, we have programs that help to develop new drywall workers, such as apprentice programs that are attracting workers from areas around the country where construction is not as active as in Arizona.”