Multifamily brokers in Orlando are breathing a little easier this quarter. Officials certainly aren’t carefree, but the market is starting to gain traction and generate some forward momentum, which is a positive leap toward a recovery. Property occupancy levels have risen, and brokers have witnessed concessions getting smaller. Subtle rent growth is a present factor in the current market, which is more than anyone could say 6 months ago.
“We feel a little better telling our story these days than we did at the beginning of the year,” says Shelton Granade of CB Richard Ellis’ Orlando office. “Over the last 90 to 120 days … we’ve been seeing and feeling some modest improvement.”
During the summer, properties Granade took to market started getting attention from multiple buyers, a stark contrast to the lack of enthusiasm felt during the depths of the downturn. Most of the minimal sale activity is fueled by the private equity investment market because these firms have cash to pony up in a tight financial landscape. There has also been a bit of foreign investment, especially from Canadian and South American companies. “More people are entering the game,” he says.
Tenants are looking to lease space and more buyers are asking about new listings, which will go a long way toward helping the multifamily industry recover from the recession, but developers are still idle. Granade says that, in a market of 155,000 units, 2,700 units have been delivered so far this year. Most of those came online during the first two quarters and have already been leased up. He predicts fewer than 1,000 units will be introduced into the area next year. This is no fault of the developer; they want to build new properties, and consumers are asking for new spaces. “The demand is definitely there; it’s just so tough to get construction financing,” Granade says. “It’s definitely possible, but it’s a challenge.” Developers are trying to diversify by, among other things, expanding their property management divisions.
To be completely confident in the multifamily industry, Granade says he’d like to see a full year of effective rent growth, a rise in the employment rate and more sales. These things will take time, but, as he points out, commercial real estate is a cyclical industry, and the worst is most likely over.
“We’ve seen things like this happen before; the market ebbs and flows,” he says. “Most people think we’ve bottomed and are heading in the right direction. It’s going to be modest improvement from here on out.”
— Jon Ross