As hiring accelerates and new multifamily construction remains minimal, vacancy in Orlando is expected to fall 60 basis points to 6.1 percent this year—the lowest annual level since 2006, shortly before the financial crisis. This follows a 190-basis-point plunge in 2011 and absorption of 3,700 high-end rentals over the last eight quarters, with many former homeowners having become renters.
Marcus & Millichap reports that while 5,400 jobs were lost during the first quarter of 2012, strengthening economic growth will support the addition of 26,000 jobs in the metro by the end of the year—a 2.6 increase in overall employment. In preparation for the spring and summer travel seasons, hotels and restaurants brought on an additional 2,600 leisure and hospitality workers to handle renewed visitor volume. The city is home to Universal Studios Orlando and Walt Disney World.
However, even with renewed occupancy and employment bolstering multifamily across the metro, new construction remains well below pre-recession levels. According to Marcus & Millichap, developers plan to bring 1,000 units online in 2012—nearly twice the level seen in 2011 but still well under the over 3,500 units completed in 2008. Yet approximately 10,200 rentals remain in the pipeline, indicating that construction may pick up in the next couple of years.
But with demand increasing and supply shrinking, rents continue to trend upward. The first quarter of 2012 saw average asking rents increase 0.6 percent to $851 per month, while effective rents rose 0.9 percent to $789 per month. Meanwhile, rents for high-end Class A units ticked up 0.5 percent to $984 per month, constituting a large portion of the 0.8 percent increase seen in the past 12 months.
Marcus & Millichap expects asking rents to advance 2.7 percent overall this year to $870 per month, while effective rents should rise 3.6 percent to $810 per month.
The submarket with the most growth over the past year was the Kissimmee/Osceola region, with overall vacancy falling 340 basis points to 6.8 percent and with an average rent of $796 per month. Meanwhile, the only submarket that saw its vacancy rate increase was the Southeast region near the airport and State Highway 15, with overall vacancy climbing 30 basis points to 7.2 percent and average rent coming in at $814 per month. Read more Orlando news at MHN City Pages.