With a booming tourism industry driving economic expansion and a new owner/renter paradigm impacting apartment renter dynamics, Orlando is experiencing continued expansion in apartment development.
Currently, development for more than 22 apartment communities totaling over 6,000 units is underway in just three hot submarkets. Demand has continued to keep up with this new supply, surging to a 10-year high in the second quarter of 2014, with market-wide occupancies topping 95 percent.
Job Creation
Metro Orlando is predicted to have an average annual growth rate of 4.1 percent from 2013 to 2020, putting it 13th for growth among American cities, according to a report from the U.S. Conference of Mayors. With an unemployment rate of 5.7 percent — well below both state and national unemployment averages — Orlando is outpacing much of the country in job creation and economic growth.
Orlando’s $50 billion tourism industry has undeniably distinguished itself as the leader for growth in Central Florida, with the largest theme parks currently undergoing historic expansions. This will add thousands of jobs to Central Florida’s employment market over the next few years. For example, Disney World announced in early July that it is actively hiring for 1,000 new local jobs, and the expansion of the Harry Potter attraction at Universal Orlando Resort alone is anticipated to create 3,500 jobs.
These theme park expansions are driving housing demand, and as a result, the nearby Southwest Tourist Corridor submarket is currently a hot spot for apartment development. In the Tourist submarket alone, there are currently 13 new apartment developments totaling around 4,000 units either under construction or in the planning process.
In addition, job creation in Lake Nona’s Medical City, a 650-acre health and life sciences park anchored by the country’s largest VA Hospital, Nemours Children’s Hospital and other world-class education and research facilities, is prompting demand for new apartments. Four new apartment complexes in that submarket currently in the pipeline total approximately 1,000 units, and there are a few other complexes on the drawing board as well.
With downtown Orlando being home to two of Florida’s largest hospitals, and both in major expansion modes, a tremendous number of jobs have been created by these medical communities. Four new complexes are underway in the hospital core, with seven others in the downtown CBD supporting office expansion.
Baby Boomers, Millennials
Orlando’s luxury apartment market has been extremely active in recent months, with the majority of Central Florida’s complexes in the pipeline being of this caliber. Construction for Altis at Sand Lake, a 315-unit luxury apartment development, is currently underway on Palm Parkway in the Tourist Corridor, where two other multifamily developments are also in progress. One of those communities, Sea Isle by Epoch Development, has begun leasing at a very attractive average rate of $1.42 per square foot.
Orlando’s developers have found luxury apartments to be a strong niche for two new expanding population segments of higher-income residents: baby boomers and Millennials.
More and more baby boomers — those born between 1946 and 1964 — are renting apartments in Orlando. For those looking for well-built, quality lifestyle options without the hassles of homeownership, luxury apartments are a perfect fit. Some boomers are even renting apartments in Orlando as second homes, with one of the primary benefits being they don’t have to worry about maintenance and upkeep while traveling.
Millennials, also known as Generation Y, are also driving demand for luxury apartment development in Central Florida. This population tends to consist of educated young professionals with a significant amount of student loan debt that may prevent them from buying homes. Luxury apartments with upscale amenities have become an attractive housing option for Millennials in Orlando.
New Urbanists
“New Urbanism,” an urban design movement that promotes walkable neighborhoods with a range of housing and job types, is also driving demand for apartment development in downtown Orlando.
Young professionals without children play a particularly influential role in this migration toward metro areas, such as downtown Orlando, for the live/work/play experience. Orlando’s urban core has adapted to attract this population, offering amenities such as neighborhood grocery stores, coffee shops, creative co-working space, unique non-chain restaurants, farmers markets in the parks and Central Florida’s new light rail system, SunRail.
This significant increase in interest has resulted in a robust apartment development pipeline in downtown Orlando and surrounding neighborhoods. There are currently 13 low- and mid-rise developments in the pipeline in and near Orlando’s core, with seven of those under construction totaling more than 1,600 units.
The only high-rise apartment development completed over the last several years, SkyHouse, opened at the end of 2013 and features 320 units in 23 stories. The building has been absorbed well by the market, with about 86 percent of the units already leased at an average effective rent of $1.99 per square foot.
— Susan Morris, Principal and Senior Vice President, Colliers International Central Florida. This article originally appeared in the August issue of Southeast Real Estate Business.