Multifamily investment costs in the Northwest Valley are low. Most multifamily complexes there are older. Since 1988, only four new apartment projects have been built in this area, bringing 900 new units to the market for a total inventory of 14,146 units. There are 128 units under construction and 180 units in the planning stages.
The average rent per month in the Northwest Valley is $562 for an average-size apartment of 712 square feet. The overall vacancy rate for all complexes with 50 or more units was 12.4 percent in the third quarter of 2003, down from 13.4 percent in the previous quarter. Average sales price is $38,000 per unit in 2003, up from $29,700 in 2002.
Downtown, multifamily vacancies average 9.7 percent for the last quarter in 2003, down from 10.8 percent in the previous quarter. Monthly apartment rents span $346 to $1,230, and new construction is ringing up prices. Apartment sizes range from 306 to 1,204 square feet per unit, with the median size at 750 square feet. Average sales price was $48,400 per unit in 2003, up from $42,200 the previous year.
The Camelback Corridor at 24th Street and Camelback Road is close on the heels of downtown as a desirable area to invest in, though offering a higher-end amenity base. The area recently entered the high-rise multifamily condominium market for the first time with 12-story Esplanade Place, a development of Phoenix-based Pivotal Group and GHE & Associates. Esplanade Place abuts the Ritz Carlton to its east and is part of the Camelback Esplanade office project, a development of Opus West Corp. Even in tough economic times, Esplanade Place sold out months before construction was completed. The project’s 56 condominiums range in size from 2,400 to 4,250 square feet and sold for $550,000 to $2.7 million per unit.
Following this lead, many other development groups are proceeding with similar projects. Donald Trump and the Bayrock Group plan to build 100 luxury condominiums and a Trump International Hotel on an infill site just east of the Esplanade complex. The Trump project still faces many tests, including city approvals and the blessing of area homeowners.
Traditionally agricultural, the Chandler/Gilbert region in Phoenix’s East Valley has become a magnet for young, affluent, well-educated renters and homeowners, and the completion of the Santan Freeway will add prime, large-scale commercial development to the mix. Gilbert alone boasts one of the highest median household incomes in Western U.S. markets. For the past 13 years, the town ranked as the fastest-growing municipality of its size in the nation. Now at more than 155,000 residents, Gilbert is expected to double in size by 2024. Combined, Chandler/Gilbert represents 370,000 residents.
Most multifamily product in Chandler/Gilbert is large, new, and well-suited to the institutional-level investor. More than half of the apartment complexes were built after 1990. The average vacancy rate in the third quarter of 2003 was 7.8 percent, down from 8.8 percent the previous quarter. Average rents are $770 per month for an average 902-square-foot apartment. Average sales price in 2003 was $80,200 per unit.