Apartment rents drop as economy worsens

TAMPA - Apartment property fundamentals in the Tampa metro area continue to be significantly affected by the economic downturn, a trend that will delay the onset of the market’s recovery for several more quarters, according to a second-quarter Apartment Research Report by Marcus & Millichap.

Vacancy is rising and will exceed 10% by year end as job losses accumulate, and the rate already equals or exceeds that threshold in the Clearwater and Pinellas Beaches submarkets.

“In the investment arena, buyers are underwriting potential acquisitions more rigorously due to capital market constraints,” says Bryn Merrey, regional manager of the Tampa office of Marcus & Millichap. “Many investors are focusing on acquisition opportunities with attractive assumable financing in place or circumstances in which sellers are prepared to carry a second mortgage.”

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

- A year after employers cut 46,400 positions in the Tampa metro area, an additional 50,000 jobs will be eliminated in 2009, a 4.2% decrease. The decline in employment will reduce household formation and weaken housing demand.

- Builders are forecast to complete 900 units this year, expanding inventory by 0.6%. More than 2,300 rental units were delivered in 2008. Despite a recent surge in activity, multifamily permit issuance is expected to total 2,600 units, down 41% from last year.

- Further increases in vacancy are expected this year, driven primarily by weakened demand. Marketwide vacancy is projected to climb 160 basis points to 10.4%, after rising 190 basis points in 2008.

- In 2009, asking rents are forecast to fall 3.6% to $814 per month, while effective rents will retreat 4.4% to $759 per month. Last year, asking rents rose 1.8%, and effective rents increased 1.4%.

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