(Crystal Proenza is associate editor of Real Estate Florida.)

GAINESVILLE, FL-A new University of Florida study finds the rental market in all commercial real estate sectors, especially apartments, is taking a hit from the current economic downturn. Fifty-five percent of the results of the report were based on responses from appraisers, while the remainder of responses were gathered from brokers and consultants.

"The biggest surprise is how notable the downturn in the state of the apartment market appears to be," Wayne Archer, director of UF's Bergstrom Center for Real Estate Studies, said in a release. "It could be that people are trying to save money by doubling up and sharing accommodations with roommates, reducing the demand for apartments."

Shelton Granade, first vice president within CB Richard Ellis' investment properties group in Orlando, tells GlobeSt.com that in general fundamentals, including occupancy and rents, in the Florida multifamily market have been flat or slightly negative over the last year. "This has primarily been the result of a shadow rental market created by failed condo conversions that re-entered the rental pool," he says.

However, Archer adds, expectations for investment in the apartment market remain steady. According to CBRE's 2008 Florida Market Perspective, the state's total multifamily sales volume was $4.9 billion in 2007 compared to $8.6 billion in 2006, $15.9 billion in 2005 and $7.6 billion in 2004.

"While we have seen softening of the rental markets since the beginning of 2007, we have recently seen signs of contraction in concessions and vacancies throughout South Florida," says Robert Given, executive vice president with CBRE's multi-housing group in South Florida. "We would expect that this will start occurring around the state very soon as well, with a few exceptions."

Those exceptions include Downtown Miami, Downtown West Palm Beach, the Naples/Fort Myers metropolitan area and the Florida Panhandle. "These areas have all seen acute overbuilding and will take much longer to recover," Given says.

On the bright side, the apartment market has shown impressive gains in terms of income growth and investment appreciation over the past five years, says Granade. Meanwhile, the supply of newly constructed rental units in the pipeline isn't overwhelming, with an expected increase in demand. "While the rental market will likely remain flat through the rest of 2008, markets like Orlando are forecast to bounce back and be among the best-performing apartment markets over the next three years," says Granade.

The study also found a softening in the retail rental market due to fewer businesses opening and more consolidating or closing. Archer predicts that declines in the industrial market will follow, since warehouse and distribution leases are somewhat dependent on retail sales.

"Either people are becoming increasingly cautious or they have already been impacted by declining real estate sales or the state budget cuts," he commented in releasing the survey results. However, he notes that cap rates have remained steady for all property types other than apartments over the last two years.

Instant Insights /

Downturn Touches Statewide Rentals

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