ORLANDO, FL-Fundamentals in the metro Orlando multifamily rental market were largely unchanged in 2008, and although they were several points off the highs seen during 2005, the market remains poised for an expected recovery in late 2009 and early 2010, reports Shelton D. Granade Jr., (top right photo) first vice president, investment properties and multi-housing, CB Richard Ellis.Market highlights:
PROJECTIONS FOR CENTRAL FLORIDA
• Buyers will continue to show strong interest in Orlando multi-family assets due to price declines and projected fundamental improvement
• The following submarkets are projected to outperform the MSA: Altamonte Springs/Longwood, SW Orange County, Winter Park/Maitland, Winter Springs/Casselberry
• New construction is projected to be limited over the next few years, due to the scarcity of multi-family zoned sites, the increase of impact fees and a cautious lending environment
• Condo to apartment “reversions” are largely absorbed from a rental standpoint, which should help boost fundamentals in the second half of 2009
• Fannie Mae and Freddie Mac will continue to be the only choice in financing moving forward until early 2010
• Demand will be very high for attractive assumable debt
• Demand for rental units will exceed the supply of new units under construction
• Rent and occupancy will stay relatively flat until mid-2009, but will increase consistently thereafter through 2013
• Bank owned sales of failed condo conversions will increase in 2009
• Cap rates are likely to increase by mid 2009
• Orlando is poised for strong rent growth in the latter part of 2009 and early 2010.
NEW CONSTRUCTION ACTIVITY
• Orlando’s total rental pool is about 141,000 units
• Only a modest 2,722 market-rate rental units will be delivered in 2009
• Orlando will see less than 1,700 units delivered in 2010
• Orlando averaged over 10,000 new units annually from 1999 to 2002
• Almost all the deliveries will be in the first 3 months of 2009
• Loans for new MF construction are very difficult to obtain in today’s capital markets
• Orlando’s rental stock decreased by an average of 2.7% annually during the past five years due to condo conversions
• Although about 8,000 rental units intended for condo conversion came back into the local rental pool, Orlando’s overall apartment supply is down 10,000 units since 2004
• Demand for new rentals remains strong, but new construction continues to slow due to the challenging lending environment, high impact fees, and a lack of infill sites with school capacity
• Only a modest 2,722 market-rate rental units will be delivered in 2009
• Orlando will see less than 1,700 units delivered in 2010
• Orlando averaged over 10,000 new units annually from 1999 to 2002
• Almost all the deliveries will be in the first 3 months of 2009
• Loans for new MF construction are very difficult to obtain in today’s capital markets
• Orlando’s rental stock decreased by an average of 2.7% annually during the past five years due to condo conversions
• Although about 8,000 rental units intended for condo conversion came back into the local rental pool, Orlando’s overall apartment supply is down 10,000 units since 2004
• Demand for new rentals remains strong, but new construction continues to slow due to the challenging lending environment, high impact fees, and a lack of infill sites with school capacity
• 3,351 new rental units were completed during 2008
• Multifamily permits in the 3rd quarter time frame registered at just 663 units, down
63% from the 3rd quarter of 2007
• Impact fees are approximately $7,500 - $11,500 per unit in Central FL counties
• Multifamily permits in the 3rd quarter time frame registered at just 663 units, down
63% from the 3rd quarter of 2007
• Impact fees are approximately $7,500 - $11,500 per unit in Central FL counties
(Post Lake at Baldwin Park apartments, middle left photo)
ORLANDO SALES STATISTICS FOR 2008
• About 7,398 apartment units in Orlando sold in 2008 for a value of approximately $599 million, down about 43% from one year ago• Nationally, multi-housing sales were down nearly 60% from 2007
• Orlando was the most active apartment sales market in Florida
• The sales decrease is primarily due to a continued disconnect in the bid/ask spread
• Cap rates did increase approximately 100 bps over the last half of the year due to
continued turmoil in the capital markets and the lagging national economy
• Underwriting has become much more conservative with regards to capital structure,
cash flow, and exit assumptions.
• The 3rd Qtr of 2008 was the most active in terms of local apartment sales, seeing
$267 million in multi-family transactions from July - Sept
• The most active buyers continued to be private equity groups
• Most buyers are receiving financing from Fannie Mae and Freddie Mac.
• Approximately seven REO and failed condo conversions were sold during 2008
CONTACTS:
Shelton Granade, First Vice President, Investment Properties-Multihousing. PH 407 839 3103. FX 407 404 5001. shelton.granade@cbre.com
Shelton Granade, First Vice President, Investment Properties-Multihousing. PH 407 839 3103. FX 407 404 5001. shelton.granade@cbre.com
Luke Wickham, (bottom left photo), Director of Operations, PH 407 839 3103. FX 407 404 5001. luke.wickham@cbre.com.
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