Sales Transactions Rise in Orlando Metro

Orlando, Fla.--Although hard-hit by single-family foreclosures, the Orlando apartment market seems to have turned a corner.

Orlando, Fla.—Although hard-hit by single-family foreclosures, the Orlando apartment market seems to have turned a corner.

“When the national economy turned, so many construction jobs were lost—60,000-65,000 jobs—and that adversely affected all rental property,” reports Stephen St. Clair, vice president-investments of the Orlando office of Marcus & Millichap. “So many foreclosures on single-family homes and condos [added] supply of inventory that was in competition with traditional apartment housing. … That has pretty much settled during the last quarter of last year and the first quarter of this year.”

As St. Clair tells MHN, “rental rates have stabilized, occupancies are trailing upward and concessions across the board have been diminishing.” Vacancy is around 11 percent, about 120 bps up from 2009, and Marcus & Millichap is projecting that 1,400 new apartments will be added to the existing supply by the end of the year—a relatively insignificant pipeline for this market. (In the ‘90s, St. Clair notes, Orlando saw an average of 19,000 units added each year.) Meanwhile, the proposed pipeline has thinned from 9,400 units to 7,300 units.

Market-wide asking rents were down 0.7 percent year-to-date, with effective rents slipping 1 percent. Class A asking rents fell 0.6 percent during the second quarter, while Class B/C asking rents fell 0.7 percent. Concessions climbed 30 bps in the second quarter, to 8.3 percent, and they average more than 9 percent in the Maitland/Winter
Park and South Central submarkets.

As for the transaction market, St. Clair reports that sales are picking up. However, while the number of transactions is up 10 percent over the last yea, though volume is down 75 percent from its peak in 2006.

“There’s a lot more buyers looking at our market for potential acquisitions than there were last year,” he acknowledges. This interest seems to stem primarily from private, out-of-state investors.

“I think they realize that Florida is still going to be in demand as a potential place to retire. The tail end of the Baby Boomers are retiring in five to 10 years, and the vast majority of them that live in Upstate New York or Michigan, [for example], would prefer to move here than across the country where the cost of living is much higher.”

The greatest investment opportunities, according to St. Clair, seem to be Altamonte Springs and Lake Buena Vista, which have vacancies of 7 percent, while Maitland and Winter Park, meanwhile, are experiencing vacancies of 14 percent to 14.5 percent.

As for the future, “Orlando has done a pretty good job in realizing we have to enhance our economic base and be more than a destination place,” notes St. Clair. The city has developed one of the nation’s largest medical schools at UCF, and it is a relatively inexpensive place to live, in a non-union state, which, all combined serve to make Orlando more than just a destination place.