America's Property Tax Advisor

Phoenix - Low Cap Rates Raise
Apartment Values


Multifamily cap rates in Phoenix remained at historic lows of 5.2% in the first half of the year, according to research by CBRE. Increased investment demand and competition for product has helped compress cap rates.


“Investors find Phoenix economic fundamentals to be very attractive and our multifamily market has become a top target for institutional and private capital. Bid lists have never been deeper and competition has never been fiercer,” Matt Pesch of CBRE Multifamily Institutional Properties told


Rates May Compress Further


I think you can make a very compelling case that cap rates are poised for further compression in Phoenix, Pesch explained.


“Cap rates are still higher in Phoenix than in many other primary and secondary markets across the country, but fundamentals in Phoenix are among the strongest in the country. This relationship of relatively higher cap rates combined with stronger fundamentals not only provides real opportunity for investors today, but also represents an inefficiency in the market, leading you to believe that there is still plenty of room for cap rate compression.”


Suburban real estate has been the most popular among Phoenix investors.


  • Suburban stabilized assets averaged cap rates of 4.79%.

  • Suburban class-A cap rates fell to 4.75%.

  • Suburban Class-B cap rates fell to 4.63%.

  • Suburban Class-C cap rates declined to 5.00%.


The Impact on Taxable Values


Low cap rates will increase the assessor’s (FCV) Market values. The Maricopa assessor uses a market income modeling program to derive values each year on apartments. With Phoenix generating lower cap rates, it will result in higher assessed market values. This increase would affect new builds for the first year as complete only on a taxable level, as any previous 100% complete properties would be under the Prop 117 5% cap Taxable (LPV) value.


Even if the assessor’s market value (FCV) is effective by the lower cap rates via the assessor’s market modeling program, the taxable value (LPV) can only increase by a maximum of 5% per Prop 117, regardless of what the assessors FCV / Market value does.