"The value in this area lies in the fact that apartment complexes are selling (there) at bargain prices," Steven Ekovich, vice president/regional manager of Marcus & Millichap, tells GlobeSt.com. "It may take longer for significant upside to materialize, but values should rise appreciably two or three years down the line."

The Tampa submarkets with the most potential for rising values are Pasco-Hernando, Temple Terrace, Polk County, Town 'n Country, Manatee County and St. Petersburg.

"They all have excellent upside potential, with favorable population growth, minimal multifamily construction and low but growing rents," Ekovich notes.

For example, average monthly rents in the Tampa Bay area are $690 versus $750 in Orlando and $775 in the Sarasota-Bradenton market, the M&M report states. The Lakeland-Winter Haven axis, between Tampa and Orlando, is averaging $600 per month.

With vacancy and concession levels at manageable levels in 2000, Ekovich expects previously cautious buyers to return to the market this year as they note a lateral tenant movement from the higher-priced class A apartments to the lower-rent class B and class C properties.

"The result may be more class B and C apartment property transactions, with investors hoping to profit from increased demand and their ability to raise rents in these particular market sectors," Ekovich says.

Vacancies rose to 7.4% in 2000, up from 6.9% in 1999. Submarkets with the lowest vacancies were South Hillsborough, 2.4% and Clearwater, 3%. The highest vacancies were in Brandon, just outside of Tampa, with 17%, and Town 'n Country, 11.5%.

Supporting his contention that bargains abound in the Tampa Bay marketplace are the flat sales prices recorded in the four key Central Florida hubs over the past three years. In the Tampa Bay submarket, for example, average unit prices in 2000 were $40,000 compared to $30,000 in 1999 and $32,000 in 1998.

Orlando showed an average $43,000 per unit last year versus $32,000 in 1999 and $28,000 in 1998. Sarasota-Bradenton came in with $65,000 last year; $64,000 in 1999; and $60,000 in 1998. Lakeland-Winter Haven posted average unit sales of $30,000 in 2000; $28,000 in 1999; and $19,000 in 1998, making that market a potential gainer in years ahead as well.

Ekovich expects capitalization rates to move downward for the rest of the year as the Federal Reserve continues to cut interest rates. "With mortgage rates dropping, there will likely be significant renewed interest among buyers this year, resulting in a higher volume of sales," the broker says.

Sales volume dropped to 7,512 last year in the Tampa submarkets compared to 11,640 units in 1999. "This substantial drop was due to buyers' caution in a market that softened somewhat last year," Ekovich tells GlobeSt.com.

Among class B and class C properties especially, many investors stayed on the sidelines monitoring vacancies and rent concessions, he says. Free rent and other concessions dotted the market in 2000 and may do so again this year, the broker says.

If rents continue to rise among class A properties by the same 6.4% they did in 2000, class B and class C properties will begin filling up rapidly and raising values for their owners, Ekovich contends.

"The rent gap between the class A and class B/C markets will eventually become so wide that affordability will become a major issue and tenants will start gravitating towards the affordable B and C units," he says. Ekovich doesn't see that scenario for this year, however.

Although strong demand for new product continues, he expects contruction starts to be in a lower range than the 8,900 units chalked up in 2000. The Brandon suburb is overbuilt while the most popular area is New Tampa, which started 1,170 units last year.

The North Pinellas submarket remains a question market with little apartment development as planners there decide how much land to allot to multifamily zoning.