SOUTHEAST SNAPSHOT, JUNE 2004

TAMPA MULTIFAMILY MARKET

Ekovich

Employment gains in both the high technology and hospitality industries should boost tenant demand in the Tampa, Florida, multifamily market. However, construction levels are up this year, and, once again, Tampa ranks among the top 10 nationally in multifamily development. The number of new renters in the area is nearly keeping pace with levels of construction, and cash flows are increasing due to increased asking rents.

Suburban Pasco County offers investors long-term opportunities as a result of low prices, accelerated economic growth and abundant space for continued development. The county’s annual population growth is more than 5 percent, which is double Florida’s tempo and more than quadruple the national average. Developers will complete 1,000 units in Pasco County during 2004, which will initially increase vacancy from 5.2 percent to 11.1 percent. However, the population influx should help to fill these units by the end of 2005.

Developers are adding residential projects in the Channel District, an entertainment and retail destination. A 28-unit loft project on 12th Street tested the waters. The construction of condominium towers, apartments and more lofts followed, and a large number of projects are in the planning stage.

Vacancy is stabilizing in the mid-8 percent range throughout the metropolitan statistical area (MSA) and is likely to remain at that level over the next 18 months as construction continues. We expect a 10-basis-point increase in 2004, to 8.4 percent. The lowest vacancy rates in the region are found along the Gulf Coast due to easy access to beaches and seasonal activities. The MacDill Air Force Base submarket draws some of the military personnel seeking off-base housing and is also desirable for its proximity to downtown and waterfront property. Submarkets with higher vacancies are found in the lesser-developed regions of the north and east, which are also the areas with higher construction rates. We expect vacancy to decline in these submarkets over time. Due to additional construction projects over the next few years, vacancy in the MSA will likely remain above the national average of 6.7 percent.

Asking rents in the Tampa MSA are steadily rising and should improve by 1.8 percent to $737 per month this year. Tampa’s rents are 20 percent below national norms, which is one reason for such large volumes of in-migration to the area. Renters are attracted to the Central Tampa submarket even though it has the highest asking rents in the region due to its close proximity to office space, entertainment facilities and nightlife. Rents are rising between 3 and 4 percent per year in the older, more established cities of Largo and Clearwater, which have access to beaches, employment centers and a wide variety of cultural amenities.

Sales prices in the Tampa MSA are volatile due to continued high rates of construction. The median price per unit at the end of 2003 was $47,000, a 5 percent increase over the previous year and a 50 percent gain since 2000. Demand for property is highest in south Tampa and the relatively dense Pinellas County due to their high barriers to entry, higher rents and low vacancy. Sales velocity has been higher in St. Petersburg where owners are selling Class B and C properties as 1031 exchange investments.

— Steven Ekovich, first vice president and regional manager, Marcus & Millichap’s Central Florida offices

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