With interest rates at record low levels, properties that can be purchased on an all-cash basis are commanding premium pricing, says Robert W. Miller, CBRE's senior vice president/Orlando.

"There have been a number of new buyers in the market from public, private and non-traditional sources," Miller says. "Demand by buyers is expected to remain very strong during 2003" because of a limited supply of properties for sale over the past two years and uncertainty in other investment vehicles, such as stocks and bonds. The CBRE executive also expects more sellers to surface this year.

"The combination of low interest rates and strong buyer demand has driven cap rates substantially lower as a result of the increased competition for those properties that are available for purchase," Miller says.

Only 19 properties, totaling sales of $250.5 million on 4,853 units and averaging $51,615 per unit were closed in 2002. That performance compares with 20 sales in 2001 totaling $288 million on 4,812 units averaging $59,854 per unit.

Sales numbers have been dropping since 1999, when 38 properties totaling 9,481 units were sold for $393 million or $41,490 per unit. In 2000, the volume dipped to 24 sales totaling $308 million or an average $49,093 per unit on 6,277 units.

The overall occupancy rate among Central Florida's estimated 139,000 rental apartment units was 91.8% at year end 2002, the same as the mid-year 2002 figure but down slightly from 92% at year end 2001. Northwest Orlando had the lowest average occupancy at 87.9%; east Orlando the highest at 94.1%.

"Rental concessions are the norm in the market," Miller says. The average free-rent concession is 7.5% of the asking rent. "During the past 12 months, the market has seen an increase in the overall level of concessions." The average quoted rent rose an average 2.6% in the same period but the average net effective rental rate, which factors in concessions, fell 0.1%.

The three submarkets with the lowest levels of concessions are Casselberry, 4.2%; Winter Park/Maitland, 4.6%; and Altamonte Springs/Longwood, 5.5%. "These submarkets are all in-fill locations with little or no developable multi-housing land," Miller says.

The highest levels of concessions are found in Sanford/Lake Mary, 11.1%; Southwest Orlando, 10.3%; and MetroWest/Kirkman, 9.6%. These submarkets have had the highest level of new construction.

But construction activity generally has continued to slow, the CBRE executive says. About 5,300 units were delivered in 2002 with 4,600 units rented. "The slowdown in construction is a welcome sign that occupancy rates should rebound during 2003," Miller says.