Is There Still Room for Growth in Central and North Florida?
ZRS Management’s new president on why Jacksonville, Orlando and Tampa will continue to outperform.
ZRS Management oversees more than 60,000 units across eight states, with a significant portion of its portfolio spread across Florida. The third-party property management firm recently appointed a new president, Darren Pierce, who joined the company as vice president in 2016.
Multi-Housing News sat down with Pierce to find out why he believes the North and Central Florida markets will continue to prosper.
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What were the top three challenges you had to overcome as a property manager in the past couple of years?
Pierce: At the beginning of 2020, all companies had to establish new guidelines to protect against the spread of COVID-19, but we also had to adapt to new regulations that changed on an almost daily basis. The multifamily industry pulled together to communicate best practices and share advice across organizations. Seeing how everyone worked together and shared information was refreshing. While we have gone back to in-person tours, self-guided tours, remote and virtual leasing are all new tools we have gained that will stay part of our playbook.
As with all industries, the multifamily industry is also dealing with staffing challenges. As the multifamily sector continues to expand, we need to continue promoting property management as an exciting and valuable long-term career.
The rebound in rental rates and occupancies have created significant capital opportunities for our clients as we have worked with them to maximize the financial performance of their communities. Unlike the office and retail space, we can adapt quickly to changes in demand. Our in-house pricing team has been invaluable in assisting our associates and clients to ensure that we capitalized on the growth over the past year.
How would you describe the past two years for Central Florida multifamily?
Pierce: Central Florida has been one of the strongest markets in the entire country over the past two years. Outside of Phoenix, Orlando and Tampa have seen some of the highest net gains of new residents in the country. Rising single-family home prices and the record low number of available homes for sale have pushed many would-be home buyers to multifamily communities. We continue to experience new lease trade out over 25 percent in both Orlando and Tampa, with occupancies between 95 percent and 97 percent.
How sustainable do you think Central Florida’s economic growth is?
Pierce: Based on how the start of 2022 has gone, Central Florida is poised for another year of significant growth. Many sources are forecasting another year with 15 percent to 25 percent effective rental growth for 2022. Early data points are backing this up.
We will also see more real estate development, more employment, simply more economic activity of all shapes and forms. We’ve seen the Central Florida market grow significantly in the last five years, and I’m excited to see where we will be in another five years.
What’s the top factor that will shape Central Florida’s multifamily sector in 2022?
Pierce: The major factor is the favorable tax treatment offered by Florida, along with a lower cost of living. We are seeing people from all over the country moving to Florida to start their career or to enjoy their retirement. We’ve seen large companies moving operations to Florida in droves. As the inflows continue, we will see a stronger and more prosperous Central Florida.
Which Orlando submarkets where the most sought-after last year and why?
Pierce: While all of Orlando has been very sought-after and in high demand, the northern submarkets of Winter Park/Maitland, Altamonte Springs/Casselberry and Lake Mary continue to outperform the broader Orlando market. Lake Ivanhoe, Baldwin Park, Horizon West and Doctor Phillips have also seen significant growth.
East Orlando has been another strong performer, with the average occupancy at 96 percent throughout 2021, double-digit new lease tread out and renewal conversions averaging 57 percent.
As for the why, we have been seeing a large inflow of net migration into Orlando from other states within the U.S. as the Florida lifestyle and favorable tax conditions make Orlando an attractive home for remote workers.
As a smaller market, Tampa also attracted lots of new residents recently. How are all these people migrating to Tampa impacting the metro’s multifamily market?
Pierce: The transformation of Tampa over the last 10 years has been unbelievable. I look at the recent rise as a continuation of a larger trend that’s been playing out for a decade. As that demand has grown overtime, the greater Tampa area has grown, improved and, ultimately, flourished.
Tampa is no longer a secondary market to Orlando, as we are seeing some of the highest rents in Florida achieved in downtown Tampa. The rent growth in Tampa has been phenomenal. The double-digit trend in rent growth and average stabilized occupancy above 96 percent has continued in Tampa. As of the last quarter of 2021, we achieved trade out rates of over 20 percent.
What are your expectations for the North Florida multifamily market in the year ahead?
Pierce: 2022 has started off just as strong as 2021 finished. We expect to see continued double-digit rent growth in the first half of the year but expect it to moderate in the second half as residents who already received large increases in 2021 come up for renewal.
Given low availability of new apartment and single-family housing supply, coupled with growth in new lease rates, we expect retention to remain very strong as renewing will remain the most affordable option.
How have your Jacksonville properties performed in terms of rent growth and occupancy in the past 12 months?
Pierce: Our Jacksonville communities have followed up a very similar trend as Central Florida, with the lease-up velocity at our new communities outpacing initial expectations and overall effective rent growth in the mid-20 percent. As a top 25 best place to live in the nation, we have seen very strong migration from outside Florida, as well as many relocations from other cities in Florida to Jacksonville. Average occupancy has been at or above 95 percent, and renewal conversations remain well above historic norms.
What surprised you the most about the pandemic’s impact on the area’s multifamily market? Are there any weak spots on the horizon?
Pierce: The strength of the rebound has been a highlight this past year. Landlords and owners worked together during the pandemic to keep residents in their homes and residents prioritized rental payments. Rent assistance was also widely available for those who qualified. This helped maintain solid footing for all.
As for weak spots on the horizon, I’m of the opinion that the worst days are behind us, but housing affordability remains a concern overall. Additional new supply will help, but it will take several years for new supply to catch up with demand.