JACKSONVILLE, FL-Construction continues to accelerate on Jacksonville’s multifamily front. But new development won’t put a damper on improvements in the Northeast Florida’s multifamily property performance for the rest of this year. So says Marcus & Millichap’s Apartment Research market report for the Jacksonville Metro area.
Class A vacancy dipped to less than 6%, and fell even lower in the newer multifamily complexes near St. Johns Town Center, M&M reports, and developers continue to identify this area as a site for multifamily development. Although it ranks more than 400 basis points higher than class A multifamily communities, class B and C vacancy rates are also compressing.
“Class C multifamily product really got hurt in the last down turn,” Brian Moulder, senior vice president of Multi-Housing for CBRE in North Florida, tells GlobeSt.com. “It’s taken some time for class C multifamily to recover and it’s really hurt our overall market perception.”
With recent improvements in marketwide performance, M&M says Jacksonville continues to offer multifamily investors sound buying opportunities at higher first-year returns than other markets, including the highly competitive South Florida region. However, the firm reports institutional grade multifamily assets in Jacksonville are changing hands at $80,000 per unit or more, a level that may increasingly cause some prospective investors to weigh the alternative of ground-up development instead.
M&M reports that investors continue to identify distressed class C multifamily product as the market’s most attractive investment opportunity. Cap rates here have compressed slightly since the start of this year to the low-9% range, but assets in locations with strong tenant demand generators and solid current operations can trade modestly lower.
“Jacksonville has about 65,000 multifamily units,” Moulder says. “When you have 18,000 units that have really been beat up it looks like a market issue. But I’d stack up a submarket like Avondale or the Southeast quadrant against any submarket in South Florida or Raleigh or Buckhead in Atlanta.”