Multifamily Construction | Southwest Market Update

Arizona, New Mexico and Nevada — 2026 Outlook

The multifamily construction market across Arizona, New Mexico and Nevada is entering a more balanced phase after several years of elevated development activity. New apartment deliveries are slowing, renter demand is improving, and developers are becoming increasingly selective about new projects.

Berkadia’s Mid-Year 2026 research shows the national apartment market is moving toward greater balance, with occupancy around 95.5% and effective rents increasing approximately 1.3% year over year. Across the Southwest, Phoenix and Las Vegas continue to absorb a significant wave of recently delivered supply. Meanwhile, smaller markets such as Albuquerque and Reno remain comparatively tight, supported by more limited supply and steady demand.

For developers, the operating environment is also becoming more favorable. At Tofel Dent Construction, we are seeing construction costs on certain projects decline approximately 10% to 15% from recent highs, alongside increased subcontractor participation, stronger trade capacity and improved skilled labor availability. In some cases, this greater workforce availability is also contributing to shorter construction schedules.

Phoenix: Moving Toward a Balanced Market

Phoenix remains Arizona’s leading multifamily market but continues to work through substantial recently delivered inventory. Absorption is improving, vacancies are beginning to decline, and the development pipeline has contracted significantly.

The reduction in future supply is an important positive. As existing apartments are absorbed and fewer new projects enter construction, the market should have more time to stabilize. Another element to consider is that Phoenix remains a major destination for relocation, driven by job opportunities, lifestyle factors, and economic growth.

For developers, the key question is no longer simply whether Phoenix needs more apartments, but whether a specific project can achieve acceptable returns under today’s construction, financing and rent assumptions. Lower construction costs, more competitive bidding and improved labor availability may allow projects that were previously shelved to be reconsidered.

Albuquerque: A More Balanced Opportunity

Albuquerque offers a different market profile. Berkadia reports approximately 58,900 apartment units, occupancy of about 94.9%, and average effective rent of approximately $1,331 per month.

With relatively strong occupancy and a limited development pipeline, Albuquerque has less new supply competing for renters than larger Southwest markets. Development opportunities will likely remain selective, with success depending on location, land basis and achievable rents. Increased subcontractor competition and labor availability may further improve project feasibility.

Las Vegas: Absorbing the Supply Wave

Las Vegas continues to work through the significant apartment supply delivered during the recent construction cycle. Newer properties remain competitive and concessions continue in some submarkets, but the future pipeline is becoming more selective.

With fewer projects breaking ground, the pace of new inventory deliveries is expected to ease, creating more room for renter demand to catch up with available supply. Declining construction costs and greater subcontractor availability could encourage developers to revisit previously postponed projects. Their feasibility will ultimately depend on financing terms and operating assumptions that support target returns.

Reno: Tighter Fundamentals

Reno is operating in a notably tighter multifamily market than Phoenix or Las Vegas. Strong population and employment growth, combined with a more limited supply pipeline, provide a solid foundation for future apartment development.

The primary challenge remains project economics, particularly construction and financing costs. However, Reno’s stronger market fundamentals may help support new development as demand continues to expand. In a market with limited supply growth, construction efficiency becomes especially important. Shorter schedules can reduce interest and carrying costs while accelerating lease-up and stabilization.

Construction Economics Are Improving

With fewer projects moving forward, the construction environment is gradually becoming more favorable for new development.

Tofel Dent Construction is seeing:

• Construction costs are down 10% to 15% on certain projects
• Greater subcontractor availability and participation
• More competitive pricing and bidding activity
• Stronger access to skilled labor and experienced trade crews
• Potential for shorter construction schedules

These improvements can influence more than the initial construction budget. Shorter construction schedules can reduce financing and carrying costs while enabling projects to begin lease-up and generate revenue sooner.