Experts Anticipate New Construction to Slow as Demand Catches Up With Supply, Although Population and Job Growth Will Continue to Bolster Multifamily Sector
ORLANDO, FL, September 11, 2018 – Cushman & Wakefield has released a midyear report on the North and Central Florida multifamily markets. Authored by the firm’s Florida Research Team, the report examines how such factors as the region’s dynamic population growth and strong labor trends affect multifamily real estate in the Tampa Bay, Orlando and Jacksonville markets.
Over the past decade, these three regions have been some of the most active in Florida in terms of apartment demand, which was fueled by elevated gains in population. During this cycle, absorption continuously exceeded new supply and led to some sharp declines in vacancies even as the number of new units delivered annually increased. Currently, supply has started to catch up with demand, with absorption rates softening slightly as competition to lock in tenants has intensified.
Key highlights from the report include:
- A “generational sandwich” is driving activity in the apartment sector. As millennials wait longer to buy homes and baby boomers/empty-nesters downsize to apartments, both ends of the spectrum are supporting growth in multifamily.
- The number of jobs generated in each market well exceeded both the statewide and national averages. Jacksonville, Orlando and Tampa Bay had growth rates in June 2018 of 3.1 percent, 3.6 percent and 2.2 percent, respectively, with a combined unemployment rate of less than 4 percent.
- Multifamily investment sales through the ﬁrst six months of the year in 2018 were down across all the three markets compared to levels from the ﬁrst half of 2017. However, new record highs per unit were set in each market: Orlando with a sale at $150,000 per unit, Tampa Bay with one at $139,000 per unit and Jacksonville at $91,000 per unit.
- Opportunities exist in submarkets with minimal new construction; the underserved affordable housing sector; senior communities near affluent, single-family markets; and suburban markets with good schools, more space and more family friendly amenities.
- Demand for housing remained high and will continue to do so for the foreseeable future based on expected new population growth. Tampa, Orlando and Jacksonville are projected to see a combined population increase of 2.1 million people over the next ﬁve years.
- At midyear, over 8,200 units had been delivered in the three markets, crushing year-end 2017 ﬁgures of 2,800 units. Orlando led the region at 4,551 new units with Tampa Bay adding another 3,277 new units and Jacksonville following with 400 new units.
- For the rest of 2018, market dynamics should continue to strengthen on incremental rent growth. However, expect trade uncertainty and increases in commodity prices to mitigate large increases in construction activity. Higher construction and land costs already have delayed the start of some projects.
“There are two sectors of the demographic spectrum that are driving growth in the three markets. Both retirees and young Millennials each represent one-third of the total population and are attracted to the abundant quality-of-life and affordability in the Tampa Bay, Orlando and Jacksonville markets,” said Chris Owen, Director of Florida Research. “This trend should define each market’s dynamics for the foreseeable future.”
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Communications Specialist, Florida