Dynamic Employment in Orlando Keeps Apartment Vacancy in Check
- Apr 23, 2015
The apartment sector in Orlando is still in upswing after over half a decade of economic recovery. The momentum is maintained predominantly by the robust job creation in the area, which lifted payrolls to an all-time high in the past year. Construction is also strong and—despite the temporary slowdown in Q1 2015—roughly 5,000 units were completed year-over-year, 1,500 more than in the preceding period. According to Marcus & Millichap’s most recent market report, 6,000 multifamily rental units are slated for delivery in 2015 and 2016, 4,800 of which should come online this year. This translates into a 2.9 percent expansion in rental inventory.
Coming off a strong year that brought 49,300 positions to Orlando, employers continued to add workers and approximately 6,000 positions were created during the first three months of 2015. Analysts expect payrolls to swell 3.4 percent in 2015, with the addition of 38,000 jobs.
The improved local economy is bringing new residents to the metro. More than 9,000 individuals moved to Greater Orlando in the past 12 months, and tenants occupied an additional 800 units in Q1 2015. The growing rental demand coupled with the slight decline in completions will produce the lowest year-end vacancy level in nine years, reaching4.1 percent according Marcus & Millichap’s forecast. A decline of 60 basis points was recorded last year despite a wave of new rentals coming online.
Landlords have been benefiting from the plummeting vacancy and have continued to raise rents, which resulted in a 0.4 percent gain on average in Q1 2015. Currently the average rent in the metro area is $983 per month, which indicates a robust 6.7 percent year-over-year increase. This level is expected to reach $1,034 by year-end according to the forecast, translating into a 5.6 percent change in 2015. This marks a slight moderation from last year’s substantial 7.1 percent pace. The average rent has increased 26 percent since its lowest point five years ago. Orlando’ multifamily market is also enjoying considerable investor interest, with small investors especially focused on Class B and Class C properties thanks to the healthy debt market.
Charts courtesy of Marcus & Millichap.