Orlando multifamily shows signs of bottoming

ORLANDO - Economic conditions in the Orlando metro area weakened in the latter part of 2008 and continue to decline in 2009, eroding fundamentals in the apartment sector, according to a second-quarter Apartment Research Report by Marcus & Millichap. Vacancy has climbed to nearly 10% as housing demand slackens due to a fall in tourism-related employment.

“Activity has been slow in the investment market, but some buyers are beginning to stir. The median price is down about 25% from a peak in 2007 but has fallen only 8% in the past year, suggesting that the bottom of the market may be near,” says Dan Colachicco, regional manager of the Orlando office of Marcus & Millichap.

“A projected weakening of fundamentals in the near term may put additional pressure on values, although buyers will closely monitor the use of concessions in the months ahead.”

Following are some of the most significant aspects of the Orlando Apartment Research Report:

- Reductions in total employment will persist for a few more months before moderating. This year, local employers are forecast to trim 36,000 jobs, a 3.4% decline but a slight improvement from 2008, when 39,500 workers were let go.

- Construction will slow to 900 rental units in 2009 from nearly 3,400 units last year. Multifamily permit issuance is projected to decrease to 1,300 units, down 75% from 2008.

- While a significant decline in completions will provide some relief, demand will be tepid due to the recession. As a result, vacancy is expected to rise 130 basis points this year to 11.1%, reflecting a 0.8% decrease in occupied units. The vacancy rate surged 260 basis points in 2008.

- In 2009, asking rents are forecast to fall 2.5% to $868 per month, and effective rents are expected to recede 3.3% to $798 per month. Higher-priced new construction supported increases in asking and effective rents of 1.6% and 0.9%, respectively, last year.

For a copy of the complete Orlando Apartment Research Report, visit www.MarcusMillichap.com.