Greater Phoenix Blue Chip

Fourth Quarter, 2022
Elliott Pollack


The panel is recognizing the severity of what we are facing in the residential construction environment.  The 2022 single family permit consensus declined from 30,000 last quarter to the 24,600 units level in the fourth quarter.  Moreover, the single family consensus for 2023 fell to 21,600 units with half of the panel believing that the year will end up with fewer than 20,000 units.  This would be the lowest number of annual permits since 2017 (19,300).  All but one of the panel members expect recovery in 2024.  The single family consensus for that year is about 26,000 permits.  This is a 5.2 percent increase over 2023.

The outlook for multifamily activity seems much more stable.  Permits in 2022 are expected to exceed 16,300 with 2023 and 2024 posting 13,700 and 12,300 apartment units respectively.  Absorptions are projected to approximately equal permits over those years.  As a result, while the panel foresees multifamily vacancy rates increasing very modestly in 2023, vacancies are expected to come down again in 2024.

In the commercial market, given the recession expected for the U.S. economy sometime in 2023, commercial construction can reasonably be expected to slow as well.   High vacancy rates in office suggest a weak building outlook for that sector.  Assuming the current low vacancy rates in industrial space continue to be supported by expansions and relocations, a recession will have a weaker impact in the industrial sector than in residential and office activity.