Orlando Apartment Market Weathers Record Completions

(February 14, 2001) — Record-setting apartment deliveries in Orlando met with robust demand during the past year, according to the latest edition of M/PF Research’s Orlando Apartment Report. Strong leasing in the last half of the year pushed total demand in 2000 to 9,890 units, slightly ahead of
completions totaling 9,598 units.

The metro’s rapid building pace played a part driving demand to an all-time high, the study reports.

“Orlando’s aggressive building program resulted in widespread availability of desirable apartment product, and the competition from so many new properties in lease-up helped keep rents at comparatively affordable levels,” said M/PF Research editorial director Greg Willett. “Near-record employment growth and the resulting substanial new household formation boosted overall housing demand in Orlando. Apartments captured much of that general demand for housing when rising home purchase costs raised affordability challenges for some households.”

Orlando ranked fourth nationally in new apartment completions last year, behind the much larger Dallas/Fort Worth, Atlanta and Houston markets. The area’s nearly 9,600 units of new supply grew the base of existing product by a startling 8 percent in a single year.For comparison, construction in 2000 increased total apartment inventory by 3 percent in Houston, 4 percent in Atlanta and 5 percent in Dallas/Fort Worth.

With demand for apartments slightly surpassing deliveries during 2000,Orlando’s occupancy rate climbed to 94.8 percent by the end of the year, up 0.8 points from the late 1999 figure. In a notable neighborhood performance, the South Orlando area managed to maintain above-average occupancy of 95.2 percent despite adding the metro’s largest block of new supply, more than 3,300 units. Pockets of sluggish occupancy do exist, however. Year-end occupancy dipped below 92 percent in both the Winter Park/Maitland and Winter Springs/Casselberry submarkets.

While Orlando recorded impressive apartment demand recently, the metro was one of the country’s weaker performers for rent growth. On average, existing properties registered rent increases of just 2.5 percent during calendar 2000, well below general consumer price inflation. The M/PF Research analysis measured rent growth on a same-store basis, looking at the rates achieved by the same apartment communities in December 1999 and December 2000 to eliminate shifts that result simply from variation in the survey sample.

Monthly rents in metropolitan Orlando averaged $697 as of December. At the top end of the scale, properties built during the past decade in Winter Park/Maitland commanded rents averaging $864 per month.

Orlando again will rank among the nation’s most active apartment construction centers during the coming year.

“The leasing environment in Orlando should remain quite competitive during the near term, because ongoing construction remains very substantial,” Willett said. “Product under way at the end of 4th quarter totaled more than 10,000 units, including significant volumes of new supply in the pipeline for North/East Seminole County, Southwest Orange County and East Orange County.”

M/PF’s Orlando Apartment Report is a quarterly report that includes data and analysis addressing the local economy and trends in apartment demand, supply, occupancy and rents. Information is summarized on the metro level and detailed for 10 submarkets.

Since 1961, M/PF Research has been the trusted national expert in apartment market research. M/PF is retained by investors, developers, owners and lenders to prepare project-specific market studies and to produce broader, strategic market selection analyses and reports. M/PF Research, located in Carrollton, Texas, is a wholly owned subsidiary of RealPage, Inc., a leading provider of property management software and web services.