Marcus & Millichap Gives Apartment Market Thumbs Down; CBRE, Thumbs Up

Maybe, says a new report from the Orlando office of CB Richard Ellis Inc. And maybe not, says a similar study from the Tampa-Orlando offices of Marcus & Millichap Real Estate Investment Brokerage Co.

In Orlando, Steven M. Ekovich, first vice president/regional manager, M&M's Tampa-Orlando offices, predicts new apartment construction will be down across the region; vacancy rates will climb moderately; concessions, including free rent, will increase; and new jobs will total only 26,000 or a 1% gain over the next 12 months.

That's the bad news.

The good news, Ekovich says in the new report, is that absorption will pick up as construction slows; asking rents will rise by 2% in Orlando and 3% in Tampa; low interest rates will help values grow faster; and the investment sales market is strengthening.

Now turn to the CB Richard Ellis report.

Robert W. Miller, CBRE's senior vice president/multifamily division/Orlando, says in his prepared analysis that concessions will be phased out over the next year; new construction will pick up; rents will remain flat; and investment sales will go nowhere.

That's the good news.

The bad news, as Miller sees it, is that sellers aren't putting their properties on the market just now because they feel higher values are coming due to stock market declines; a lack of ideal building sites continues to discourage new construction; occupancy is down from 92% in January; and less than $42 million in apartment sales is on the books this year versus $288 million in all of 2001.

Ekovich, however, sees a silver cloud surfacing on the investment sales side.

"The improving local apartment market will cause prices to rise by 3.5% over the next 12 months, as competition for apartment investment property begins to heat up in the wake of the economic downturn experienced over the past 18 months," he says in his report.

In the Sarasota-Bradenton market specifically, "steady construction levels will lead to higher vacancy rates and slower rent growth over the next year, but prices will rise as buyers compete for properties in order to position themselves for the coming rebound," Ekovich says.

However, he predicts Sarasota-Bradenton will continue to have the highest vacancy level in the region over the next year, at 10.5%.

Ekovich projects Tampa will add 4,500 new units over the next 12 months, down 20% from the previous year. Orlando will gain only 4,000 units, down from past years that saw 9,000 to 10,000 units delivered annually.

Miller says in his report 3,773 new units surfaced in the first half. Another researcher, Charles Wayne Consulting Inc. of suburban Maitland, FL, counts 3,800 units under construction.

If completed by year end, that would give Orlando a total 7,573 new units for 2002. Eighteen months ago, 13,000 new units were under construction, Charles Wayne reports.