The Florida Multifamily Fundamentals
MARKET PERFORMANCE
CONSTRUCTION AND PROPERTY PRICES
INVESTMENT
Overall, the Florida multifamily real estate market shows superior performance across all national markets. In general, Miami, Tampa, Orlando, and Jacksonville, stand out as robust emerging markets, showing strong employment growth, high absorption rate, and relatively low vacancy rate.
Strong population, and job growth has been followed by a surge in new construction, low demand from renters, and declining property prices.
In this context high multifamily permits in Tampa market, and high inventory units shows resilience and adaptability.
Institutional investors are taking a more measured approach may result in a more stable and balanced market in the future. By keeping a substantial capital reserve on the sidelines
On the other hand, private investors have a deeper understanding of the local market. This local knowledge has been an asset in identifying investment opportunities.
TAMPA METRO HIGHTLIGHTS
Tampa’s favorable business conditions have attracted major operations from some of the world’s most well-known brands such as Amazon, Bristol Myers Squibb, Citigroup, Depository Trust and Clearing Corporation, Johnson & Johnson, JP Morgan Chase, MetLife, Pfizer, Pitney Bowes, Raymond James Financial, and USAA.
“AstudybyHireaHelperin2023revealedthatcorporaterelocationsintheUnitedStateswereat theirhighestratesince2017.Floridastoodout,withanimpressive86%increaseincorporations movingtheirheadquartersintothestate,surpassingthosemovingout,makingittheleadingstatein netcorporateHQgains.Furthermore,Tamparankedamongthetoptencities,displayingan impressive42.9%increaseinnewcorporateheadquarters.”
FLORIDA MARKETS FUNDAMENTALS
Overall, the Florida multifamily real estate market shows superior performance across the multifamily national markets during the 3rd quarter of 2023.
In general, Miami, and Orlando, stood out as robust emerging markets, showing strong performance across key parameters. Notable employment growth, net operating income growth, and annual unit absorption levels consistently outperform the national market Robust construction and deliveries were followed by lower property prices, announcing a market stabilization.
EMPLOYMENT GROWTH:
Employment growth is a critical factor in the multifamily real estate market, and it plays a pivotal role in shaping the demand for rental properties and the market's overall health. It influences rental demand, tenant quality, rent levels, investor confidence, market resilience, and long-term property value. Real estate investors closely check employment trends when assessing the health and potential of a multifamily market.
Overall, Florida shows superior performance across all national markets. Miami, Tampa, Orlando, and Jacksonville showed a robust emerging market posting persistent employment growth over time. A strong job market has been attracting people to an area, leading to an increased population. As more people move to the region, the demand for rental housing, including multifamily units, rises. Employment growth directly correlates with a larger pool of potential renters.
MULTIFAMILY PERMITS
Multifamily Permit is a key indicator for assessing the overall health and potential investment trends and opportunities in the multifamily real estate market. Multifamily Permits show developers and investors’ current interest in Multifamily Real Estate Markets with high permit growth stand for higher potential investment opportunities.
Tampa Bay's high multifamily permit growth and a large inventory of multifamily units during the 3rd quarter of 2023 indicate a robust and competitive real estate market with strong demand. It reflects positively on the area's economic health, job market, and investor confidence, making it an attractive destination for real estate investors and renters alike.
NET OPERATING INCOME
NOI growth is a comprehensive indicator of multifamily real estate market conditions. It encompasses economic health, supply and demand dynamics, investment attractiveness, asset performance, and risk assessment. Investors, property owners, and market analysts rely on NOI growth data to gauge the financial performance and potential of the multifamily market and individual properties within it.
During the 3rd quarter of 2023, Miami led the market with an impressive record-breaking 6.8 percent growth in net operating income, followed by Orlando, a modest increase by Tampa, and a decline in Jacksonville.
PROPERTY PRICES
During the 3rd quarter of 2023, the multifamily real estate market experienced a general decline in property prices.
A general decline in property prices in a multifamily real estate market can result from several factors. One key factor is robust construction and property deliveries, leading to higher vacancy rates, which may signal a market stabilization. Additionally, increased competition among sellers due to a surge in property listings or new construction can lead to price reductions as sellers compete to attract buyers, particularly in anticipation of changing economic conditions. These factors collectively contribute to the softening of property prices in the market, opening new opportunities for investors positioned for the long run
In General, Multifamily real estate has proven to be economically resilient, and Florida in particular has shown to have strong fundamentals, such as employment growth and high unit absorption.
12-MONTH ABSORPTION UNITS:
The "12-month Absorption Units" is a critical metric for investors in the multifamily real estate market as it provides valuable insights into the market's dynamics and potential investment opportunities. The 12-month absorption units measure the number of units that have been leased or absorbed by tenants within the past year.
This metric directly reflects the level of demand for multifamily properties in a specific market. As an investor, knowing the demand for rental units in an area is crucial for making informed investment decisions.
FLORIDA MULTIFAMILY REAL ESTATE MARKET REPORT - 3RD QUARTER 2023
In the third quarter of 2023, Florida's multifamily real estate market showed varying trends as described by some of the Multifamily key performance indicators across its major markets, including Miami, Orlando, Tampa, and Jacksonville. Following, find some of our:
Inventory and Construction: Miami, Orlando, and Tampa feature large multifamily inventory units, with Miami having the highest number. However, Jacksonville has a lower inventory but a reasonable number of units under construction, showing growth potential.
Absorption and Vacancy: Miami and Orlando have relatively lower vacancy rates (5.20% and 9.60%, respectively), suggesting strong demand. With the highest vacancy rate (12.60%), Jacksonville may face challenges attracting tenants. Absorption rates are positive in all markets, showing ongoing demand.
Rent and Growth: Miami commands the highest market asking rent per unit at $2,276.00, while Orlando has the lowest at $1,761.00. Miami and Tampa are experiencing positive annual rent growth, while Orlando and Jacksonville have seen declines.
Sale Prices and Volume: Miami has the highest market sale price per unit at $304,000.00, reflecting robust property values. Orlando and Tampa also have healthy sale prices. Orlando leads in the 12month sale volume at $2.20 billion, indicating strong investment activity.
CONCLUSION:
Florida's multifamily real estate market in the 3rd quarter of 2023 presents a mixed picture across its major cities. Miami and Tampa stand out with lower vacancy rates, positive rent growth, and strong property values. Orlando, while having robust investment activity, faces rent declines and higher vacancy rates. Jacksonville, while experiencing lower rent and a high vacancy rate, may represent a more challenging market for investors. Investors and stakeholders should carefully assess their investment goals and risk tolerance considering these market dynamics.
KEY PERFORMANCE INDICATORS FOR THE FLORIDA MULTIFAMILY REAL ESTATE MARKET
Selecting the right multifamily real estate market for investment is a crucial decision, and the Multifamily performance indicators are indeed important factors to consider. Each indicator supplies valuable insights into the market's current and future conditions. However, when selecting a multifamily real estate market for investment, it's crucial to consider how these parameters interact with each other and align with your investment goals and risk tolerance. For example:
• High construction activity (units under construction) may lead to increased supply and potential rent growth opportunities but could also elevate the risk of oversupply.
• A low vacancy rate combined with positive annual rent growth may show a strong market for rental income potential.
• Market sale price per unit and 12-month sales volume can help you evaluate potential investment opportunities, understand market valuations, and assess the market's liquidity.
• Absorption rates, along with vacancy rates, provide a holistic view of supply and demand dynamics. High absorption rates relative to high construction can signal a healthy market.
In summary, key performance indicators (KPIs) are vital tools for conducting a comprehensive market analysis and making well-informed investment decisions in the multifamily real estate sector. These KPIs enable you to gauge the current market conditions, growth potential, and associated risks, allowing you to align your investment strategy with your goals. It's important to recognize that while overarching market trends provide valuable insights, a deeper level of analysis is often required.
It's worth noting that within every general market, there exist many submarkets, each with its unique socioeconomic dynamics and demand characteristics. These submarkets demand distinct approaches and strategies. At the Multifamily Real Estate Group, we offer on-demand submarket reports that provide a more granular and detailed perspective to assist investors in making more informed decisions tailored to specific submarket conditions.
1. Inventory Units: The total number of multifamily units available in a market is a fundamental factor. It indicates the size and scale of the market and helps you understand the level of competition among multifamily properties.
2. Units Under Construction: The number of units currently under construction provides insight into the market's growth potential. High construction activity can indicate increasing supply, potentially affecting future vacancy rates and rental income.
3. 12-Month Absorption: Absorption rates measure how quickly new units are being leased or sold in the market. A high absorption rate suggests strong demand, while a low rate may signal oversupply or weak demand.
4. Vacancy Rate: The vacancy rate reflects the balance between supply and demand. A low vacancy rate typically indicates strong demand, while a high rate may suggest oversupply or market challenges.
5. Market Asking Rent/Unit: The average rental rate in the market per unit is crucial for assessing income potential and setting appropriate rent levels for your properties. It also helps gauge the market's affordability.
6. Annual Rent Growth: Rent growth trends write down the market's potential for rental income appreciation. Positive rent growth suggests increasing rental income over time.
7. Market Sale Price per Unit: Knowing the average sale price per unit helps you assess property values and market pricing trends. It's important for potential acquisitions and property valuations.
8. 12-Month Sales Volume (Billion): The total sales volume in the market over a year supplies insight into the level of investment activity. Higher sales volumes may indicate a more liquid market.
