The record setting development is substantially outpacing renter demand
Sarasota Herald-Tribune
A new report projects the Sarasota-Manatee County metro area to continue to see a boom in apartment construction, even after the area has seen more than 10,000 apartments added in the past five years.
Over the next five years, Yardi Matrix, a market intelligence company for investment professionals, anticipates 13,441 apartment units to be built in the North Port-Sarasota-Bradenton metro, according to a report published by RentCafe.com.
Doug Ressler, a senior analyst and business intelligence manager for Yardi Matrix, told the Herald-Tribune those estimates are based on direct conversations with developers by a robust team of market researchers with the data updated monthly.
The Yardi Matrix research staff notes that from 2019 to 2023 the Sarasota-Manatee metro had 10,575 apartment units constructed. That culminated in another 3,148 more units expected to be completed by the end of 2024.
Multifamily developers set a nationwide record for the number of apartment units constructed this year.
“By the end of the year, developers are on track to complete a staggering 518,108 rental units, marking a 9% increase compared to 2023 and a staggering 30% rise from 2022,” the RentCafe report stated.
Ressler said the number of units expected in the combined Sarasota, Bradenton, North Port region shows strong demand for the cultural and recreational amenities offered. He also expects the pace of development to pick up.
“We see a significant − and I’m not understating this − a significant number of units coming on board between now and 2029,”
Inflationary housing costs in Sarasota area
Ressler noted a downside to the growth of the rental market, as many of the new properties will be luxury units potentially contributing to inflationary pressures and affordability concerns in the local market.
Sarasota, he said, already has 6% higher inflation than the rest of the Florida and about 4% higher inflation than the rest of the state.
Housing costs are 15% higher in Sarasota than the state as a whole, driving local inflation.
“It’s the long pole in the tent,” he said of housing costs.
However, while the newer apartment units that are constructed will likely be at higher price points, more apartment units should put downward pressure on prices at older units, he said.
“With all the new supply that’s coming on board, it becomes more of a consumer market,” he said. “Landlords understand that. It costs them money to lose a renter to another property, so what we are seeing is what we call concessions.”
More negotiating power for Sarasota area renters ahead?
“What you are going to see is fairly robust deceleration of rental prices and the ability to negotiate rental prices downward,” Ressler said.
Currently, the occupancy of Sarasota’s apartment properties hovers around 96%, which is the industry considers to be full occupancy as people move in and out of apartment units, according to Yardi Matrix data. The Bradenton area and south Sarasota have a occupancy rate of 94%, Ressler said.
Some of the reasons for Sarasota’s strong rental market, Ressler said, include renters staying in the rental market for a longer time. Millenials as a generational cohort have not bought single-family homes at the same pace as previous generations and current economic conditions.
High interest rates make the prospect of home ownership more difficult for renters to make the jump to homeowner and housing costs are high in the region.
“What you are seeing is longer duration of renting and that’s driving these numbers, and the absorption and the occupancy,” Ressler said.
However, Ryan Lieberman, a vice president of development for the Sarasota-based Barrington Group Inc., questioned the occupancy figures and also anticipates the apartment boom Sarasota-Manatee experienced in recent years to “temporarily pause.”
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“We are seeing occupancy drop and I think an overall vacancy rate that is higher than you would typically see when supply and demand are in balance,” Lieberman said.
Lieberman said the dip in occupancy rates has to do with the thousands of new units developed, however, he’s not concerned about the long-term health of the Sarasota apartment market.
He does not question what developers have been telling Yardi Matrix on planned units, just that he expects several projects to “hit the pause button” to wait for demand to catch up.
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“It is a big investment and it is a big risk, but there’s one thing seasoned developers in our area understand is that Sarasota is a desirable place to live. It will always attract demand,” he said.
For complete article and other similar stories from Mr. Gilliam, click here.
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