Florida Multifamily Rental Market Strong, But Faces Likely Slowdown

By Dan Tracy

Florida’s multifamily rental market has outpaced much of the nation in occupancy and new construction during recent years, but some tough times may be in the offing.

"It’s not going to be the fairy tale of build it and they will come," Theron Patrick, data analyst at ALN Apartment Data, said during a panel discussion earlier this month at the Florida Apartment Association Annual Conference & Trade Show at Disney’s Contemporary Resort.

The potential problem, as Patrick sees it, is that new apartment construction is continuing apace at a time when the absorption rate — people renting new places — is starting to slow. He also expects new home sales to rise, in part because of continued low interest rates and purchases by the millennial generation as they mature.

"It’s a zero sum game. If somebody buys, they don’t rent," Patrick said.

Also speaking were Brian Alford, market economist at CoStar Group, and Cameron McIntosh, real estate research analyst of Real Page.

Statistics gathered and discussed by the trio indicate the Florida rental market has been strong in recent years because of the state’s steady job growth, which has been accompanied by some wage increases, too.

The result has been lots of new apartment communities.

Orlando, for example, has added about 25,000 new units during the past five years, while Tampa and Miami each have brought on roughly 20,000. Orlando and Tampa have filled almost all of those places, while Miami has fallen about 5,000 units short.

Statewide,there are nearly 1.4 million multifamily units. For their analysis, the panelists focused on the 750,000 units owned or managed by large management companies. About 92 percent of them are rented. The average rent for a two-bedroom, two-bath apartment is more than $1,200. That’s up nearly 5 percent from 2016, but the prior year’s rise was 8 percent.

Patrick predicted coming months could see an even slower rise in rents, along with an increase in concessions, such as a week’s free rent or gratis upgrades in the apartment amenities.

But McIntosh was a bit more bullish, saying a slowdown might not occur until 2019 because some of the new construction will not be ready until then. Orlando, in particular, he said, should not experience much of a slowdown in rent appreciation.

"Demand is robust enough in most of these markets," said McIntosh, referring to Orlando, Tampa, Miami, West Palm Beach and Fort Lauderdale.

Much of the new construction, the analysts said, is in the Class A, or luxury level, of apartments. Alford said that sector, which charges the highest rents, may have the softest demand going forward, particularly during the latter parts of 2018, when some high-end communities open their doors to renters in various parts of the state.

Right now, leasing agents need up to 30 days to rent a unit, statistics show.

Josh Gold, executive vice president of the FAA, said the industry has been in a strong growth mode for several years, but likely will experience a slowdown, much like the stock market or any other business periodically faces.

"Obviously, you can’t keep the momentum forever," he said.

Editor's note: More information from the conference session Numbers Talk, but What Are They Saying, will appear in a future issue of Multifamily Florida magazine.