Economic recovery in Tampa will remain choppy through 2010 as housing-market weakness persists and local population growth falls well below levels achieved prior to the onset of the recession. Tampa remains a popular relocation market, but net migration into the city will continue at a below-trend pace until job creation accelerates sufficiently to draw new residents to the metro area. While payrolls have increased year to date, following three years of contraction, growth has been modest and the trend remains inconsistent from one month to the next. Job creation will continue over the remainder of this year, but at 0.6%, the annual rate of employment growth in the metro area for 2010 will fall short of the national figure by approximately 40 basis points. In the wake of the expiration of the homebuyer tax credit, and lacking more substantial population and job gains, the local housing market will remain soft through the second half. This, in turn, will weigh on the broader Tampa economy, delaying the onset of a more robust expansion cycle until 2011.

The economic downturn and slow-starting recovery have taken a toll on commercial real estate fundamentals in the Tampa metro, with vacancy rising significantly across core property sectors over the past few years. With the exception of the apartment sector, which began to post modest improvements earlier this year, fundamentals continue to weaken. The rate of occupancy and rent reductions has slowed dramatically from 2008 and 2009, however, suggesting market stabilization may be approaching. Nonetheless, distress will remain prevalent here until the local economic recovery gains traction and space demand improves significantly. At present, approximately $2.5 billion of commercial real estate in the Tampa metro area is considered distressed, placing it in the middle tier when compared to other markets nationwide.

Local apartment properties posted a 90-basis-point decline in vacancy during the first half of 20 1 0, however, the overall vacancy rate, at 9.8%, remains more than two times greater than levels reported at the last cyclical low point in late 2006. The drastic run-up in vacancy, along with significant rent reductions in recent years, have led to many troubled situations and pushed apartments to the top of the list for distressed dollar volume in the Tampa metro area. In many instances, declining NO Is have made it difficult for owners to cover debt-service obligations, within the CMBS sector, more than 27% of the outstanding multifamily debt has fallen to debt-service coverage ratios of less than LOx. Reduced property values have also created issues for local apartment owners and will result in more distress as debt matures. Approximately 17% of the multifamily CMBS loans in the metro area are reportedly at loan- to-values of more than 100%, and roughly one-quarter of all outstanding multifamily CMBS loans are slated to mature between 2010 and 2012.