Multifamily Market Report
Tampa-St. Petersburg Metro Area
Strong rental demand holds vacancy tight
Vacancy hovered just 30 basis points above the 20-year low in the third quarter as the metro’s robust economy is boosting apartment demand. Employment gains have outpaced the U.S. rate of growth for the past nine years. Many of the positions created during the past four quarters were in higher paying segments including financial and professional services. The latter category also includes workers in the rapidly expanding tech sector. Employment opportunities are drawing job seekers to the region. During 2019, net migration will top 41,300 residents and the influx of people will result in the formation of roughly 25,500 households, nearly double the U.S. rate of change. Many of these households will opt to rent as the cost of purchasing a residence continues to climb, pricing more potential homeowners out of the market and keeping them in apartments.
Favorable operations underpin heightened construction activity
The limited supply of available rentals and steady rent gains are encouraging developers to move forward with new apartment projects. Deliveries in 2019 will climb to the highest level since 2000, with nearly all submarkets receiving additional inventory. The largest project underway is in the Water Street development in Downtown Tampa. The 26-story building provides 420 apartments and a 2021 delivery is expected. As available sites dwindle and construction costs rise in the downtown cores, developers are moving into nearby suburbs including Largo and Pinellas Park, or even farther north into Pasco County.
Orlando Metro Area
Rental demand fueled by robust employment and household gains
During the past four quarters the metro registered the second highest rate of job growth in the nation. The largest expansion was in the higher-paying professional and business services sector, which boosted household income to nearly twice the U.S. rate of change. It is also an indication of the local economy diversifying beyond its root in hospitality. Employment opportunities are helping to entice more than 1,000 new residents to the region each week, creating the need for additional housing. Orlando also led the nation in household formation during the same 12-month period, and many are choosing to rent as rising residential prices prevent more people from owning a home. The cost to own in favored neighborhoods or with desired amenities is even higher, making apartment living a more viable option in some areas.
Strong demand drivers hold vacancy tight and push rent up
Vacancy rested just 20 basis points above last year’s cyclical low in the third quarter, with the rate below 5 percent in all of the metro’s submarkets. Apartment demand was especially strong in the Winter Park/Maitland area with vacancy at 2.4 percent in September even though more than 2,100 rentals have been added to inventory during the past two years. The lack of available units metrowide is keeping developers active with projects underway in the majority of submarkets. The pipeline, however, has 1,000 fewer units than at this time last year, an indication that vacancy will likely remain low, producing sizable rent gains into next year.
-Marcus & Millichap
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