Many industries are rebounding from the Great Recession by producing more modest versions of their product to meet consumer demands, but the Valley’s resurgent apartment sector is bucking that trend with new units that feature everything from Roman soaking tubs to granite countertops.
The trend reflects a big shift in who lives in apartments, as many former homeowners can’t afford a single-family house now but have a family that doesn’t fit comfortably in a traditional apartment.
One example of the shift can be seen at 224-unit San Marquis Apartments in Tempe, the largest large-scale multifamily property to open in the Valley in more than two years.
Owner Mark-Taylor included resort-style pools, clubhouses, stainless steel appliances, granite countertops, kitchen islands and upscale designs and finishes not typically found in apartments. The privately-held developer is marketing its Tempe complex as “luxury homes cleverly disguised as apartments.”
Mark-Taylor President Dale Phillips said the trend is a response to former homeowners but also to a large number of condos built in the real estate bubble that have since become apartments. Those units had more upscale features than rental properties and are now forcing apartment builders to position new properties with more house-like amenities.
“If you’re going to build an A-product now, you have to be aware of the competition and in a lot of cases, your competition is something that was intended for sale,” Phillips said.
The company is incorporating the same features in a 383-unit Chandler community that’s scheduled to open this summer. The amenities have allowed Mark-Taylor to set rents about $150 above the rest of the market, he said.
Rates range from $995 to $1,854 for one-, two- and three-bedroom units.
Phillips said about 19,000 multifamily units are planned in the Valley in the next three years, and he expects about 2/3 of those have a strong chance of actually being constructed. Hardly any new apartments came online in the last few years, despite historic construction levels of about 10,000 units a year.
The multifamily industry has shifted because the residential real estate crash created a change in who lives in apartments, said Mark Stapp, the executive director of the Master of Real Estate Program at the W.P. Carey School of Business at Arizona State University.
Many families with children and pets will be in apartments for some time because of reduced incomes, damaged credit and a shrinking supply of homes on the market, he said.
“Now you’ve got apartments that are actually competing with single family homes. You weren’t having to worry about that before,” Stapp said. “Apartments were a step before you got into a home.”
He expects the multifamily market will respond with options beyond the more house-like designs.
Stapp said there’s also a growing number of smaller apartments that are more cost-effective while still offering high amenities. He expects apartment communities will become less homogenous than in the past as each location caters to niches, such as access to Metro light rail.
On the downside, Stapp is concerned about a shortage of affordable housing because the housing industry may have trouble meeting future demand. Builders face limitations because of tight credit and the loss of many construction workers who left the Valley during the economic downturn, he said.
“This does put pressure on the lower-income level market,” Stapp said. “They get priced out of the market and that can become a real issue.”