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TAMPA, FL-A swelling migration of new residents is generating unprecedented demand for apartment and condo homes the Tampa Bay shelter market is striving to fill. So far, condo converters are leading the way, paying premium prices for existing apartments and shrinking the supply of for-rent apartments, according to a new market analysis by Marcus & Millichap Real Estate Investment Brokerage Co.

Transaction volume has doubled over the past 12 months, driven by large deals for condo conversions. The median prices have gained 19% to $57,400 per unit. “Condo conversions are steadily taking apartments out of stock,” says Linwood C. Thompson, Marcus & Millichap’s managing director of the firm’s National Multi Housing Group “New construction of market-rate apartments is limited as builders have diverted resources to condos.”

Additionally, Thompson says surging construction costs are limiting development of market-rate units. The average per-unit hard construction costs now exceed $90,000, “well above prices for existing units that are not regarded as conversion opportunities,” the executive says.

Apartment vacancy fell slightly to 7.2% in the first half, following the delivery of most of this year’s new supply. Thompson projects absorption for the rest of the year will outpace new construction, bringing vacancy down to 6.5% at year end.

Tampa’s economic and population engines are driving the condo and apartment markets, Thompson says. Tampa employers are on track to add 47,000 jobs in 2005, a 3.7% increase from a year ago. “Over the past 12 months, 43,600 people migrated to the Tampa metro area, fueling demand for apartments.”

Asking rents are expected to rise 2.8% by the end of the year to $769 per month. “Concessions are abating and effective rents are forecast to climb 3% to $720 per month,” Thompson says.

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