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Orlando has always shown an uncanny ability to grow, diversify and prosper, all while shrugging off a few economic hiccups along the way. Now, it appears that “the City Beautiful” is doing it again, with apartment development leading the way.
Not since Lincoln Property Co. built the 164-unit Aspire apartments in 2008 has any significant multifamily rental development taken place in downtown Orlando. Yet, over the next two years more than 2,000 new rental apartment units are expected to dot the downtown landscape. This represents an untested pace for downtown, higher than any other two-year stretch in Orlando’s history.
Although the addition of this many units may raise some concern (especially understanding Orlando’s history of overbuilding), several well established multifamily developers have taken a deeper look into Orlando’s urban lifestyle; and they like what they see. It would appear that through a mix of public/private partnerships, infrastructure improvements and quality of life, downtown is on the verge of moving one step closer in its quest of becoming one of the most robust “live-work” cities in the U.S.
Laying the foundation for its continued transformation is the nearly $5 billion in capital investments that have been, or are being, invested in the downtown area. This includes venues for sports (Amway Arena and Citrus Bowl renovation), transportation (SunRail, Lynx Central), the arts (Dr. Phillips Center for the Performing Arts), business (Creative Village) and infrastructure (I-4/408 redevelopment). This does not include the hundreds of millions of dollars that is expected to be spent on developing the seven new apartment communities servicing downtown.
Undoubtedly, this investment in Orlando’s future will propel the downtown area in the right direction. Interestingly, much of the infrastructure improvement mentioned is taking place at an opportune time — Orlando’s multifamily market is hot.
Orlando’s diverse job engine is driving the multifamily market. Fueled by population growth well over twice the national average, Orlando is proving to be a state leader once again, gaining more than 31,500 jobs between January 2012 and January 2013. Keep in mind this is up considerably from 2011, which saw 22,000 jobs added.
Over the past three years, absorption of units has easily outpaced deliveries of new product. In the fourth quarter of 2012, 980 units were absorbed while only 317 units were delivered. In 2013, approximately 2,500 units are expected to be completed, while absorption is expected to reach 2,600. This trend is expected to continue over the next five years with absorption generally keeping pace with deliveries.
Occupancy levels in Orlando have spiked 5 percent, to 94 percent from 2010 to the end of 2012. Internal analysis of numerous operating data suggests that occupancies will continue to rise in 2013.
This same analysis suggests that rental rates are gaining momentum in 2013, with some properties reflecting gains of more than 3 percent just in the past six months. This is up considerably from 2012, which saw rents grow by a healthy 2.7 percent. When considering the extent to which effective rents have fallen since 2007 (as much as 18 percent), combined with the strengthening job market, it makes sense that Orlando rents should continue to outpace much of the U.S. in the near future.
With the development of the Creative Village and other downtown employment sectors, job growth near downtown is expected to be especially robust over the next few years. An industry rule of thumb suggests that for every six jobs created, one apartment unit is filled.
If new job creation continues at the current path, the simple math suggests the need for approximately 15,000 new units over the next three years, conservatively.
With continued commitment from public/private investment, a burgeoning young workforce, affordable, high-quality living options are exactly what the downtown area needs to continue to expand as a truly top-notch live-work city.
— Kevin Judd, principal at ARA Florida