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Apartment Demand Outpaces Supply;
Investors Seek Value-Add Opportunities Metrowide
New residents filling rentals. The net migration of more than 39,800
people this year will bolster demand for apartments in Tampa-St.
Petersburg. Many of the new residents are moving for job opportunities.
Employers added roughly 29,400 positions year over year in March with
the largest gain in the relatively higher-paying business services sector.
With more people working and salaries rising, the median household
income jumped more than twice the national level over the past 12
months, allowing more people to move out on their own. The additional
households are generating robust demand for units.
Developers focusing on Central Tampa. Builders completed nearly
5,400 rentals during the past four quarters and almost all submarkets
received additional inventory. The bulk of new units arrived in Central
Tampa. The submarket received roughly 1,300 rentals over the past 12
months. Still, vacancy in the area dipped 10 basis points annually as
demand for apartments in walkable urban neighborhoods proliferates
from both young professionals and downsizing empty nesters.

A potential headwind for new luxury Class A units in near downtown cores may
come from an increase in condos due for completion this year. However,
a thinner construction pipeline expected throughout the market in the
quarters ahead won’t keep pace with the steady need for apartments,
holding vacancy tight and pushing rent to a new high.

 

Investment Trends

• Tampa-St. Petersburg’s favorable rental market and the low cost of
  financing have many investors opting to refinance and hold rather
  than divest assets. As a result, the pipeline of for-sale listings is slim,
  increasing competition and pushing prices higher.
• • The wave of construction, especially in the downtown cores, continues to draw out-of-state investors. Over the past 12 months, newer
  Class A assets have traded above $220 per door on average with cap
  rates generally below the mid-5 percent range. A couple of new luxury
  buildings in downtown St. Petersburg topped $300 per unit.

• SALES TRENDS
  • Investors remain interested in metro apartment assets, although
  demand outpaces supply. Transaction volume rose slightly during the
  past 12 months.
  • During this period, increased competition pushed the average price
  up 11 percent to $119,600 per unit, while the average cap rate dipped
  30 basis points year over year into the low-6 percent range.