The Orlando multifamily market has exhibited noticeable improvement this year, and is gaining momentum toward a very strong recovery. After 3 years of rent and occupancy losses due largely to the global recession, apartment fundamentals in Central Florida have registered gains again in 2010. With more than 207,000 new jobs expected locally through 2015 and a very favorable supply/demand balance during the next few years, investors see strong upside in the Orlando apartment market moving forward.
Sales volume in Orlando has increased significantly through mid-year, and is up from the historic lows of 2009. Through June, the local market has seen approximately $188 million in multifamily sales — already approaching last year’s total of $219 million but still largely off the 2005 high of $3.2 billion. Cap rates have compressed considerably during the last several months, and most buyers are securing Freddie Mac debt on new acquisitions. Lenders have been the most active sellers in 2010 thus far, and institutional buyers have returned to the acquisition market. New private equity groups — both national and foreign — have also been drawn to Orlando during the last 12 months.
Average rents are projected to increase about 1 percent in the second half of 2010 from approximately $805 to $811. Occupancy in the Orlando area increased more than 200 bps from the beginning of the year, and is currently 92.2 percent. With minimal new supply in the pipeline, MPF Research projects that Orlando rents will increase from $805 to $965 during the next 5 years. Occupancy is also projected to tighten further, reaching nearly 95 percent in 2012. Several submarkets are forecast to outperform the market in 2010 and 2011, including Altamonte Springs/Longwood, East Orange County, and North/East Seminole County.
Multifamily investors expect Orlando to be buoyed further by the lack of new supply being built. Only 786 rental units will be delivered this year — a historic low of less than 1 percent of the total rental pool. With such modest new supply in the pipeline for 2010 and 2011, occupancy and rents are poised for improvement during the next 3 years.
Although Florida’s unemployment rate exceeded the national average for the last 18 months, Orlando is expected to have the second strongest job growth in the country during the next 5 years according to MPF Research. Total employment in Orlando is projected to grow by 207,000 jobs with the biggest gains expected to come in professional and business services and education and health care. Many of those jobs are being added at the Nemours Hospital, the VA hospital, and UCF’s Medical School — three brand new facilities. The local unemployment rate dropped month-to-month in March, April, and May, and MPF predicts that Central Florida will enjoy modest job gains throughout the rest of 2010. Growth will be strongest in 2011, 2012, and 2013, which will see a net gain of more than 50,000 jobs each year. These strong increases coupled with minimal new supply should help lead to a robust apartment market later in 2010 and beyond.
— Shelton D. Granade is the senior vice president of the Central Florida Multi-Housing Group with CB Richard Ellis in Orlando.