Apartment Market Heads for Robust Year

"With a solid foundation in place, Orlando is well positioned to forge ahead with ambitious Downtown redevelopment plans and further economic diversification," Ekovich says. "We forecast that the rental rates, net of concessions, will increase by the largest amount since 2000."

Increased strength in the market has pushed up construction activity. Ekovich says completions are forecast to total 3,000 units this year, up from 2,249 units in 2004. Absorption is expected to account for 3,400 units "which will allow vacancy to improve slightly," the broker says.

Demand for multifamily product in the metro area is being fueled by job growth which Ekovich predicts should reach 4.1% in 2005, led by gains in tourism-based industries, professional and business services, and education and health services. "Tourism, one of the critical aspects of the Orlando economy, was up by 20% last year, while construction employment grew by 8.6%," the Marcus & Millichap executive says.

Ekovich's observations are backed up by Robert W. Miller, a senior vice president in the Central Florida Multi-Housing Group at CB Richard Ellis Inc.'s Orlando division. Miller says his group finished 2004 with a record sales production of $2.2 billion on 19,000 apartment units, up from $1.8 billion in 2003. CBRE represented sellers in the disposition of 4,000 units valued at $266.5 million in the Orlando area.

"The assets sold in Orlando range from several AA properties that collected premium pricing of over $100,000 per unit to older communities that presented value-added opportunities," Miller tells GlobeSt.com. "Buyer interest in multihousing properties in Orlando continues to be extremely strong, and we expect to see a high level of sales activity again in 2005." The broker says "the majority of our assignments are still on B and C class properties."

Hal Warren, director of Cushman & Wakefield of Florida Inc.'s Apartment Group in Orlando, also predicts "a record year" for his team. "The [investment activity] pace isn't slowing," Warren says. "Investment grade rental properties are out-performing virtually every investment medium in the free world and almost every commercial institutional and private investor ranks well-located, quality apartment properties very high on the list."