Arizona cap-rate evidence by market
Capitalization rate is annual net operating income divided by price, before financing. A useful comparison requires matching the geography, property type, condition and income convention. These dated references are a starting point for that work.
Underwriting takeaway: Underwrite the rent recovery and the valuation multiple separately. Better vacancy can coexist with wider reported caps, and a new-building sale sample can say little about an older property’s repair burden.
Dated cap references: points and stated ranges
| Geography / period | Reported cap | Supported comparison | Coverage boundary |
|---|---|---|---|
| Phoenix Q3 2026 | 6.7% average | Q2 2026: 6.0%; Q3 2025: 6.0%. +70 bps in each comparison. | Published sales average; sample count, weighting and NOI convention undisclosed. |
| Phoenix — older window Q2 2026 / YTD sales | Generally 5.5–6.0% | Descriptive closed-sale range; not a quarterly average. | Do not calculate a change from this range to the newer Kidder average. |
| Tucson Q2 2026 / YTD sales | Around 5.5% average | Northmarq describes stability against 2024 and 2025. | First-half sales included no Class A properties; older B/C dominates. |
One percentage point equals 100 basis points. No statewide weighted average is calculated. Total sales counts, where reported, are not cap-reporting sample counts. A change in the properties sold is not a repeat-sale valuation change.
Local facts become property decisions
| Market / period | Vacancy | Monthly rent | Rent change | Boundary |
|---|---|---|---|---|
| Phoenix Q3 2026 | 10.7% | $1,535 asking / month | −0.9% YoY | CoStar universe; not the stabilized-property series below. |
| Phoenix Q2 2026 | 6.6% stabilized | $1,519 asking / month | −1.8% YoY | Apartment Insights; different coverage and quarter. |
| Tucson Q2 2026 | 7.7% | $1,149 asking / month | −0.6% YoY | Physical vacancy and asking rent do not establish subject collections. |
Phoenix: value an earned recovery, not a vacancy headline
Observed: Kidder’s Q3 data show 4,366 absorbed units against 1,849 delivered, yet annual asking rents declined. Its published cap average widened. These measures can move in different directions because leasing, financing and the properties that sell are different processes. Read the dated source.
Local mechanism: A buyer of an older garden apartment needs renewals and maintenance evidence that a metro transaction average cannot supply. Repricing can make a sale financeable even while lease-up competition recedes. A higher average cap is not proof that every existing owner lost the same percentage of value.
RentalCalcs interpretation: Stabilization of operations is more defensible than assuming both rent growth and cap compression. Treat an exit below the entry cap as an upside sensitivity until comparable sales and executable debt terms support it.
What would change the view: Firm effective rents, fewer concessions and several matched transactions at tighter caps would weaken this caution. A drop in quoted vacancy without better collections would strengthen it.
Property decision: Obtain a monthly bridge from scheduled rent to deposits received. Reconcile free rent, delinquency, down units and renovation downtime before capitalizing the seller’s NOI.
Tempe and North Gateway: map deliveries onto lease expirations
Observed: Kidder lists The Pier in Downtown Tempe and Inspire Sonoran Desert in North Gateway among major projects underway. Their expected deliveries are future schedules, not completed supply or measured neighborhood cap rates. Read the dated source.
Local mechanism: A nearby building whose leases expire during a competing project’s initial leasing campaign can suffer concessions even when the metro pipeline is shrinking. Proximity, unit mix and the prospect’s actual alternatives matter more than the statewide construction headline.
RentalCalcs interpretation: Use a lease-by-lease downside in exposed renewal months. Compression needs pricing power after nearby lease-ups fill; it should not be inferred from a semiconductor investment announcement or a declining metro pipeline alone.
What would change the view: A delayed competing delivery or verified preleasing could reduce the immediate pressure. A broad amenity and rent discount at new properties would undermine an older-property renovation premium.
Property decision: Ask managers to document competing effective rents, delivery dates and concessions within the subject’s real renter search area. Compare the renovation premium after utilities, fees and free rent.
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Tucson: an older sales cohort faces a later supply test
Observed: Northmarq reports first-half transactions concentrated in B/C buildings, largely delivered in 1965–1985, with no Class A sales. Its cap average remained near 5.5%. Central Tucson and the East Side accounted for much of the activity. Read the dated source.
Local mechanism: That cohort makes physical-condition diligence central. A nominally attractive yield can disappear into electrical, cooling or envelope work. Sales concentration establishes liquidity in a cohort; it does not establish a Central Tucson or East Side neighborhood cap.
RentalCalcs interpretation: Stable caps are a useful reference case only if collected income and repair costs hold. Northmarq’s supply discussion makes Oro Valley/Catalina a separate leasing test because new construction is concentrated against a smaller existing inventory.
What would change the view: Sustained leasing through the incoming deliveries would support a firmer view. Persistent discounts, rising vacancy or a large unbudgeted systems project would favor a wider required yield.
Property decision: Separate recurring repairs from initial capital work. Request bids and a unit inspection schedule, then stress rent loss while work occurs. Do not price a new luxury property from this older B/C cohort.
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Where the local evidence stops
| Market | Verified coverage | Missing evidence |
|---|---|---|
| Phoenix | Q3 2026: 6.7% average | Published sales average; sample count, weighting and NOI convention undisclosed. |
| Phoenix — older window | Q2 2026 / YTD sales: Generally 5.5–6.0% | Do not calculate a change from this range to the newer Kidder average. |
| Tucson | Q2 2026 / YTD sales: Around 5.5% average | First-half sales included no Class A properties; older B/C dominates. |
| Other regions / neighborhood caps | Qualitative diligence only where no matching sale series is verified | Flagstaff, Prescott, Yuma and rural Arizona do not have a current matched apartment cap sample verified in this report. Phoenix and Tucson figures cannot fill those cells. Student leases, seasonal income or a thin local buyer pool require their own sale and rent evidence. Request dated closed sales with a reproducible NOI basis; asking caps and gross rent-to-value indexes remain separate. |
Place the Phoenix metro evidence beside the county’s geographic and screening context. Maricopa County market context. Its screening measures remain separate from apartment sale NOI.
County tools serve a different task: inspect the Arizona county directory for geographic context and its stated methodology. A modeled rent-to-value index cannot corroborate an observed apartment NOI cap. A broker’s asking yield is not a closed-sale observation.
Compression, stabilization and expansion each need evidence
Source synthesis: Northmarq’s Q2 operating analysis emphasizes demand absorbing new supply. Kidder’s newer Phoenix observation shows that better occupancy did not prevent a wider sales cap average. Both sales perspectives draw on CoStar, so they are not independent transaction confirmation. CBRE’s midyear financing outlook makes prospective compression conditional on bond yields and fundamentals; it does not override the observed Phoenix result.
Publisher forecasts: Northmarq expects Phoenix’s delivery pace to slow and Tucson’s cap rates to remain relatively stable near term. CBRE’s midyear capital-markets outlook expects incremental compression to resume in 2027 if bond yields decline and fundamentals improve. These are attributed publisher forecasts, not measured Arizona outcomes.
These cases are conditional editorial underwriting tests. They have no assigned probability or unsourced basis-point target. Short-term policy rates do not determine a property’s borrowing cost; benchmark yields, lender spreads, amortization and fees all matter.
Compression
Collected rents firm after lease-up competition clears, while executable debt terms allow more buyers to bid. Phoenix supply digestion is the operating support; it is not sufficient by itself.
Watch: Renewal effective rents, concessions on new leases, matched-sale NOI, all-in borrowing cost.
Invalidation: Renewed rent discounting or higher debt costs despite better physical occupancy.
Underwrite: Keep the tighter exit as upside; verify that the acquisition also works at a flat cap.
Stabilization
Absorption offsets remaining supply, but soft annual rents and buyer expenses prevent a rapid re-rating. Tucson’s older cohort supplies a dated example of cap stability.
Watch: Collections through nearby delivery windows; recurring repair and insurance budgets.
Invalidation: Material net income erosion or repeated matched sales at a different yield.
Underwrite: Use flat caps as a reference and make value creation depend on demonstrable NOI, not a multiple change.
Expansion
Higher financing costs, concessions or repair needs force a lower bid for the same income. Phoenix’s newer average already shows why operating improvement alone cannot exclude this case.
Watch: Failed financings, wider bid spreads, delinquency and capital-needs findings.
Invalidation: Durable effective-rent growth and competitive funded bids for comparable assets.
Underwrite: Test a wider exit and lower NOI together; maintain cash for lease-up and capital work.
How much NOI would offset a wider exit cap?
Value = annual NOI ÷ (cap rate ÷ 100). The acquisition below has $120,000 NOI and a 6.00% entry cap. A hypothetical 7% exit at unchanged income gives $1,714,286 gross value, a -14.3% change. Preserving the purchase price requires 16.7% cumulative NOI growth. A one-percentage-point cap increase is +100 bps, not a 1% value decline.
- Verify collected rent through the lease-up windowIncome: reconcile rent roll, concessions and actual receipts.
- Replace seller costs with buyer bills, quotes and repair scopesNOI: deduct recurring buyer expenses before debt; separate capital work.
- Match sale NOI and stress a wider exit capValue: compare consistent NOI, then test financing and exit cash.
Hypothetical assumptions. NOI change is cumulative over your chosen holding period, not an annual growth rate. Results exclude debt, sale costs, taxes and interim cash flow.
Starting value $2,000,000
Exit value $1,714,286 (-14.3%)
$120,000 starting NOI at 6% → $120,000 exit NOI at 7%. NOI must change by 16.7% to preserve starting value at this exit cap rate.
| Total NOI change | 5.00% exit | 6.00% exit | 7.00% exit | 8.00% exit |
|---|---|---|---|---|
| -10% | +8.0% | -10.0% | -22.9% | -32.5% |
| 0% | +20.0% | 0.0% | -14.3% | -25.0% |
| +10% | +32.0% | +10.0% | -5.7% | -17.5% |
| +20% | +44.0% | +20.0% | +2.9% | -10.0% |
The fixed matrix does not change with the tool. These are hypothetical assumptions, not market forecasts. Both exclude debt payoff, selling costs, taxes and interim cash flow. Negative values are signed independently of color.
A reconciled acquisition: cap rate is only one result
Illustrative 20-unit acquisition: $2,000,000 price and $1,250 monthly rent per unit. Every budget input is a hypothetical assumption, not a property quote or local average. Test a cooling-system and utility-cost omission before paying for a metro leasing recovery.
| Income or expense | Amount | Treatment |
|---|---|---|
| Scheduled income | $300,000 | 20 × $1,250 × 12 |
| Vacancy / collection loss | -$24,000 | 8% combined allowance; avoid double-counting concessions |
| Effective income | $276,000 | Before recurring expenses |
| Buyer property taxes | $36,000 | Verify classification, limited property value and district bill |
| Insurance | $18,000 | Binding commercial quote required |
| Management | $13,800 | 5% of effective income |
| Recurring repairs | $24,000 | Cooling maintenance; initial replacements are separate |
| Owner utilities | $30,000 | Verify meters and recoveries |
| Administration / other recurring | $34,200 | Itemize contracts, payroll and fees |
| Total recurring expenses | $156,000 | Sum of the recurring cost rows |
| Net operating income | $120,000 | Effective income minus recurring costs; before debt |
| Replacement reserve | $10,000 | Below NOI in this example |
| Annual debt service | $91,018 | $1,200,000 loan; assumed 6.5%; 30-year monthly amortization |
| Cash after debt and reserve | $18,982 | Before income tax and distributions |
Buyer cost checks: Arizona’s class-four statute includes qualifying residential rental property. Obtain the assessor’s actual classification, limited property value and complete district bill. Do not assume the sale price is the taxable value, the seller’s benefits transfer, or a valuation growth limit caps the bill.
ADOR’s qualifying long-term residential rental TPT change took effect January 1, 2025. Remove an obsolete city rental TPT line only after checking the lease use and applicability; property tax, insurance, maintenance and utilities remain. Obtain commercial coverage quotes and separate deductibles and capital replacement cash. Cooling-system condition belongs in both inspection and utility analysis.
The 60.0% loan-to-price assumption is not a lender offer. Down payment $800,000 + closing costs $60,000 + initial work $80,000 = $940,000 invested cash. Going-in cap is 6.00%; DSCR is 1.32× before reserves, or 1.21× after them. Debt yield before reserves is 10.00%. Cash-on-cash is 2.02% before income tax. Confirm lender income and reserve conventions.
Initial capital work is separate from recurring repairs. NOI divided by price plus initial work gives 5.77% yield on cost, excluding closing costs. It is a different denominator from going-in cap.
Original buyer-cost stress: An additional $10,000 recurring annual cost reduces NOI to $110,000, cash after debt/reserves to $8,982, and gross value by $166,667 at the same 6.00% cap. Reclassifying recurring costs as capital work would conceal this loss.
Official buyer-cost references: Maricopa County Assessor — Property tax FAQ; Arizona DIFI — Fire-related loss and business coverage; Arizona legislature — Class four property; Arizona Department of Revenue — Residential rental guidelines. These establish checks, not a parcel bill or premium.
Build a property analysisThe linked calculator opens separately and does not receive these assumptions. Enter the property’s actual budget and verify its reserve conventions. A link click is not a completed calculation or saved deal.
Questions to settle before the offer
Is 6.7% the Arizona cap rate?
No. It is Kidder’s Q3 Phoenix published average. It is not statewide, neighborhood-specific or a rate for every property.
Why do Phoenix vacancy figures disagree?
The Q2 Northmarq figure is for stabilized properties using Apartment Insights. Kidder’s Q3 CoStar series has different coverage and timing. Do not subtract them to claim a quarterly change.
Can an older Tucson apartment use a luxury sale comp?
Only after accounting for income basis, condition, capital work, location and buyer pool. The reviewed first-half Tucson cohort had no Class A trades.
What must a broker provide before a cap comparison is usable?
The close date, price, asset scope, in-place versus forward NOI, expenses, concessions, cap-reporting eligibility and any non-market terms. A price per unit alone cannot establish a cap.
Open the free printable worksheet
Record every source period and NOI convention, collect the buyer documents, and carry both lower income and a wider exit through the decision. The worksheet is free and requires no account.
Source ledger, limitations and refresh
Accessed and researched October 18, 2026. Observation periods, publication timing and this substantive review are separate. Brokerage publishers have commercial interests. Shared providers are disclosed; multiple publishers using one dataset are not independent corroboration. Missing sample size, weighting and NOI conventions remain unknown.
- Maricopa County Assessor — Property tax FAQ
Period / publication: Current guidance accessed October 18, 2026; page publication date unstated
Underlying provider: Maricopa County Assessor
Method / scope: Assessed values, district rates and levies; applies to Maricopa administration, not a complete tax estimate for every Arizona parcel.
Refresh trigger: Annual valuation notice, adopted district levies and property-use changes. - Arizona DIFI — Fire-related loss and business coverage
Period / publication: June 29, 2021 guidance; accessed October 18, 2026
Underlying provider: Arizona Department of Insurance and Financial Institutions
Method / scope: Older policy-reading guidance, not a 2026 premium estimate. Commercial policies vary; business-income coverage depends on actual terms and inclusion.
Refresh trigger: Binding property quote, policy wording, exposure or renewal change. - Kidder Mathews — Phoenix Q3 2026
Period / publication: Q3 2026; exact publication day unstated
Underlying provider: CoStar
Method / scope: Published average apartment cap; count, weighting and NOI basis undisclosed. Report geography is not a neighborhood or statewide sample.
Refresh trigger: Q4 edition or publisher correction. - Northmarq — Phoenix Q2 2026
Period / publication: Q2 operations / 2026 YTD sales; companion article August 7, 2026
Underlying provider: Apartment Insights operations/development; CoStar sales; Northmarq analysis
Method / scope: Pages 1, 3–5. Stabilized vacancy; descriptive cap range. Cap count, weighting and NOI basis undisclosed. Shared sales lineage with Kidder.
Refresh trigger: Next quarterly edition; update observations and outlook together. - Northmarq — Tucson Q2 2026
Period / publication: Q2 operations / 2026 YTD sales; companion article September 4, 2026
Underlying provider: Apartment Insights operations/development; CoStar sales; Northmarq analysis
Method / scope: Published approximate cap average; no Class A first-half trades. Cap count, NOI basis and weighting undisclosed.
Refresh trigger: Next quarter and supply/lease-up evidence. - CBRE — Midyear 2026 capital-markets outlook
Period / publication: Midyear 2026 outlook; publication day unstated
Underlying provider: CBRE Research / Econometric Advisors
Method / scope: Conditional national forecast across property types, not an Arizona closed-sale cap sample. CBRE participates in brokerage and capital markets.
Refresh trigger: New forecast, financing change or materially different local collections. - Arizona legislature — Class four property
Period / publication: Statute accessed October 18, 2026
Underlying provider: Arizona legislature
Method / scope: Classification guidance, not a parcel tax estimate or local legal review.
Refresh trigger: Statutory change and subject assessor notice. - Arizona Department of Revenue — Residential rental guidelines
Period / publication: Qualifying change effective January 1, 2025; accessed October 18, 2026
Underlying provider: Arizona Department of Revenue
Method / scope: Long-term residential rental tax guidance. Short-term lodging and property taxes require separate treatment.
Refresh trigger: Rule change and verification of lease use.
Summarized facts and original interpretation are provided instead of copying report graphics or proprietary datasets. Corrections: use RentalCalcs contact and identify the market, source edition and claim. Verify the property’s leases, expenses, condition, legal use and financeable sale comparisons before an offer.