Investors Drive ‘Exceptional’ Competition for Phoenix Apartment Properties Article originally posted on CoStar on August 17, 2021 The apartment investment market in Phoenix is surging so strongly, multifamily executive David Fogler said there’s an unexpected reason he can’t single out one deal that symbolizes the high demand. Nearly every multifamily property that hits that market these days is attracting unprecedented interest and a high price, said Fogler, a Cushman & Wakefield executive managing director based in the city. “We’re not a market where there’s one deal you’d point to and say, ‘Wow, that’s such an outlier.’ Almost any deal is getting incredible interest from the investment community,” Fogler said. “The competition is exceptional.” The investor interest was illustrated in the past five business days, when five large apartment trades totaling $334.2 million closed in greater Phoenix. Though unrelated, the deals display the spectrum of investors interested in the city’s apartments, as well as the wide range of properties, built from the 1970s through the early 2000s, that buyers are scooping up. The city has also attracted nearly every kind of buyer, including large institutional investors like global investment firm KKR and regional players like Waahe Capital, which is based in Mountain View, California. Though more than five deals closed in that time in Phoenix, the high sale prices, combined with the varying sizes of the buyers, provide a clear representation of the city’s broad appeal among investors. The greater Phoenix deals were: Acacia Capital Corp. paid $95.65 million, or $351,654 per unit, to acquire the 272-unit Luxe at Ocotillo in Chandler from FPA Multifamily. TruAmerica Multifamily paid $94.5 million, or $393,750 per unit, to acquire the 240-unit Townhomes at Kyrene in Tempe from The Hudye Group. KKR paid $54 million, or $264,706 per unit, to acquire the 204-unit Newport Apartments in Avondale from JB Partners. AEW Capital Management paid $51 million, or $209,016 per unit, to acquire the 244-unit Alantra in Mesa from Univest. Waahe Capital paid $39 million, or $198,980 per unit, to acquire the 196-unit Sandal Ridge in Mesa from Prospect Ridge Advisors. There are a handful of economic and demographic factors propelling Phoenix to the top of the list of target markets for investors. For years, the city has been beefing up its technology manufacturing industry, and companies like Lucid Motors, Taiwan Semiconductor Manufacturing Co. and Intel have all announced plans to invest billions of dollars in the city, a move expected to lead to the creation of thousands of new jobs and a need for more apartments. “We have a much more educated, knowledgeable work base,” Jim Crews, an executive managing director at brokerage Cushman & Wakefield, has said. “It’s all underneath the radar, but there are a lot of tech jobs here.” Residents from California and other more expensive places are moving to Phoenix for its relative affordability, agreeable weather and fast-growing tech sector. And more broadly speaking, the U.S. Southwest has welcomed more businesses and residents from the West Coast in recent years thanks to its relatively business-friendly tax policies as well as a lack of the natural disasters that plague California, from earthquakes to wildfires. Fogler has spent more than three decades in Arizona’s multifamily market and has brokered more than $5 billion in property sales. He’s seeing a large influx of private capital, as well as 1031 exchanges, which are part of a federal program that allows real estate investors to defer capital gains if they reinvest proceeds into a similar property in a short period of time. On a standard apartment sale in an average year in Phoenix, Fogler said he’d be happy to get between eight and 12 offers. Now, it’s standard to get more than 20 offers on a single property, and Fogler said he’s had listings that garnered more than 40 offers. “It certainly is active as I’ve ever seen it,” Fogler said.