Tampa Multifamily Recovery Gains Momentum

TAMPA, FL-The multifamily recovery in Tampa is gaining momentum—and it looks like the time may be right to gradually begin raising rents. So says Marcus & Millichap.

The multifamily recovery started in a few areas of the metro during the first quarter of 2010 and has expanded to nearly every submarket. Through the first three quarters, the vacancy rate declined in 15 of 17 submarkets, after falling in only four
submarkets in the preceding nine months, Marcus & Millichap reports.

M&M predicts the vacancy rate will fluctuate slightly in the quarters ahead until job growth becomes more robust. The firm expects asking rents to rise
1.1 percent in 2010 to $806 per month, while marketwide effective rents will advance 2 percent to $758 per month. In 2009, asking rents dipped 5.5 percent, and effective rents receded 6.3 percent.

“We have gotten to the point where employment has, for the most part, stabilized,” Bryn Merrey, regional manager of M&M’s Tampa office, tells GlobeSt.com. “We are seeing good operators go into properties and boost operations quickly.”

Demand for high-end rentals remains strong, although improvements in the
marketwide class A vacancy rate were impacted by the spotty performance of newly delivered units. Class A properties added in 2010 were only 26 percent occupied at the time of completion, and the weak performance of these assets resulted in a smaller drop in high-end vacancy in the submarkets where the construction occurred.

Although the recovery in vacancy and rents will proceed gradually until employment growth accelerates, the progress thus far continues to improve investors’ outlooks. Transaction velocity rose in the past 12 months, M&M reports, and additional deals will occur as property operations continue to stabilize and determining values becomes less challenging.

So far, deals have involved large, high-quality assets or distressed properties. But improving NOIs will generate more sales of stabilized class B and class C complexes, which have not traded due to divergent price expectations between buyers and sellers.

“As far as the investment sales side, when you look at the spread between treasuries and cap rates, this is probably one of the best times in the last 20 years to buy deals,” Merrey says. “We have already seen prices increase from early 2010 to today. And we are actually starting to get approached by developers again about land deals and building new apartments.”