Due to a record number of starts in 1999 and 2000, one major factor currently affecting multifamily development in the Orlando area is a slowdown in construction, according to Cole Whitaker, senior director of The Apartment Group, a Cushman & Wakefield company. Building permits are down almost 50 percent for the first quarter 2001 as compared to first quarter 2000. However, absorption is beginning to outpace supply.

Historical absorption was at approximately 6,500 units per year, while year end March 2000 saw approximately 9,000 units absorbed and year end September 2000 saw approximately 9,200 units absorbed. "With building permit activity at record lows and absorption creeping up, it's only a matter of time before supply and demand ratios fall back in line," says Whitaker. "Presently, there are certain submarkets that are experiencing some softness, but we believe that this is only temporary, and that this softness should subside by early to mid-2002."

Orlando has seen multifamily construction occurring virtually in all submarkets, says Ballard. In the Metrowest PUD, Winter Park-based Epoch Properties has completed the 743-unit Phase I and II of Park Avenue of Metrowest and is getting ready to begin construction of Phase III (451 units, 1,500 units total at buildout). In the Seminole County/Lake Mary market, there are approximately 2,500 units in the pipeline with companies such as ZOM, Altman, Colonial, CED, Epoch and PAC Land Development jockeying for position. "The Hunter's Creek market, along with Metrowest and Lake Mary/Sanford have all experienced overbuilding," says Ballard. "But due to the lack of available sites, any softness in these submarkets should subside by mid-2002." He adds that the reason for the growth of multifamily starts in all of these markets is the tremendous job growth taking place in Orlando. He cites Metrowest's proximity to Universal Studios, the explosion of office development in Lake Mary and the tremendous single family growth in the Hunter's Creek area.

One significant multifamily submarket that has effectively been created, according to Jay Ballard, multifamily land broker at The Apartment Group, is downtown Orlando. Lincoln, Zom, Post and Echelon all have new projects either under construction or completed. "These new developments will bring 1,355 new units to downtown, creating an infill niche that was non existent," says Ballard. Rents are estimated to be in the $1.20 to $1.40 per square foot range.

There has also been some student housing (leased by the bedroom) built within proximity to The University of Central Florida, according to Whitaker. In conventional deals, he says that interior finishes have become more extensive, including built-in computer work stations, high speed internet access, crown moulding, tile entries, intrusion alarms, upgraded appliance packages and 9-foot ceilings. Clubhouse upgrades include resort style pools, built-in theaters with surround sound, satellite, large projection screen televisions and office suites (computer stations with fax machines and copiers). The 1,500-unit Park Avenue at Metrowest has approximately 15,000 square feet of ground floor retail space built around a community park as an amenity for the tenants, he adds.

Downtown infill rental rates range from $1.20 to $1.40+ per square foot and suburban rates range from $.85 to $.95 per square foot. According to Charles Wayne Consulting, Inc.'s March 2001 report, overall vacancy for Metro Orlando was 92.4 percent, down slightly from 93 percent in September 2000.

The submarket to keep an eye on, according to Whitaker, is the Lake Mary/Sanford submarket, which seems to be garnering the most interest from the developers. "There has been tremendous growth in office and commercial activity in this submarket; however, depending upon the number of units delivered at any one time, this market could become overbuilt," he says. He also says that the jury is still out on the downtown infill submarket. "Post Parkside was the first deal completed. They experienced a rapid lease-up due to a pent up demand in the downtown core."

As for future growth, Whitaker says, "The new construction pipeline has shown signs of shrinkage in 2001 and is expected to do the same in 2002." He adds that estimates are for the pipeline to fall below 10,000 units this year and maybe even below 9,500 in 2002. "The supply and demand ratios should fall back in line over the next 12 to 18 months as new construction starts slow. Absorption should maintain its pace and the softness in certain submarkets should subside. Occupancies have dropped slightly over the last 24 months; however, these should stabilize as well," he says. Rent growth has slowed from 3 to 4 percent per year to 2 to 3 percent per year.

"Overall, Orlando continues to see explosive residential growth in all directions geographically. Our job base has added approximately 30,000 to 35,000 jobs per year," says Ballard. "Although we have a long way to go before we are considered a "hi-tech" corridor, we do have some unique technological niches that are being created in central Florida." He notes that the simulation and laser industries are firmly ensconced at the Central Florida Research Park and a local company is a world leader in Surface Acoustical Wave (SAW) technology, used in wireless communications. "We remain the number one tourist destination in the world (with a world class airport in the midst of a $1.3 billion expansion), while we also consistently rank in the top 10 for convention business (currently doubling the size of the county convention center). As our economy diversifies, Orlando should continue to see steady growth over the next 10 to 15 years."

Cole Whitaker is senior director of The Apartment Group, a Cushman & Wakefield company.


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