US, Florida / Orlando multifamily market report – Q4 2022

Read our Orlando multifamily market report for valuable insights on the market's strengths, weaknesses, and future outlook. Stay ahead of the competition with informed decisions.

last updated Monday, September 2, 2024
#orlando multifamily market report #is orlando a good place to invest in real estate

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John Burson

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Discover valuable insights on the Orlando multifamily market by reading our comprehensive market report. Gain a deeper understanding of the market's strengths and weaknesses and get a clear outlook on what to expect in the future. Take advantage of this opportunity to make informed decisions and stay ahead of the competition.

Market Overview

• The downturn caused by the COVID outbreak impacted Orlando's apartment market, although the recoveries of both the economy and apartment markets were robust. Orlando is second only to Las Vegas in terms of its dependence on the tourism sector as an economic engine. Both locations resumed operations during the summer of 2020, although with fewer guests. However, so-called revenge travel has lit a fire in the region's economy. The area has seen extraordinary and unsustainable rent growth levels over the past several quarters, dramatically impacting affordability in the metro. Moderation of multifamily market conditions began in Q3 2022. Still, the engines that drove the rebound in the area will likely continue growing the economy, though a recession may temporarily disrupt an expansion.
• Before the COVID outbreak, Orlando's economy was expanding on the wave of tourism: an estimated 77 million people visited the area in 2019, continuing eight consecutive years of record volumes of visitors for the metro. The next several years will probably see a modest drop in visitors as international tourists continue to be a smaller proportion of what they once were. The speed and duration of the expansion in the metro will probably be determined by the complete eradication of outbreaks around the country, given the influence on tourists and conventioneers.

Market Strengths

• Orlando's economy recovered from the Great Recession faster than other metros in Florida, and significant investments are being made to expand the metro's driving tourism industry. All the major theme parks in the area have expansion projects underway or planning that show strong visitor growth for years. However, COVID outbreak-related delays slightly postponed some of these engines from coming online. The University of Central Florida is also emerging as an economic driver.
• Job growth is expected to be well above average through 2027 at +1.6% annually, compared to +0.4% nationally (per Moody's). Professional & business services jobs, now the second largest category in the metro, had strong growth in 2019, growing +2.9%.
• The metro's for-rent market had a minimal supply of new units before 2013, allowing the apartment market to see steady tightening. The total number of units in the metro's rental market inventory only recently surpassed the peak in 2003 (per REIS).

Market Weaknesses

• Although Orlando has been diversifying its economy over the last several decades, volatile and low-wage leisure and hospitality jobs remain the largest segment of the job market, accounting for 20.8%. The persistence of variants and the continued deficit of conventions and international tourists have kept the hospitality sector from returning to pre-pandemic employment.
• New apartment development activity has been robust: around 24,500 units are currently underway, and 48,600 units have been completed since 2017. While the economy will eventually recover, further improvement in vacancy rates may not happen due to the generous supply.

Development

• Since the beginning of 2006, over 41,000 condo units have been completed, and around 2,200 condo units are still underway and are due to be delivered by Q4 2023. Another 32,000 units were converted to condos during the housing boom. This inventory of 'multifamily' housing is a potential shadow inventory that is a minor concern.
• Before the Great Recession, almost all multifamily development was for condos. As a result, Orlando had a minimal supply of new rentals before 2013. This potential shadow supply of apartment units has not impacted the local rental market, but it bears watching due to its large scale.

Construction Underway

Outlook

• Orlando's apartment rental market began bouncing back in mid-2021, and the robust recovery continued into mid-2022, with some necessary easing starting in Q3 2022. Its job market is improving, held back primarily by the availability of workers. Multifamily rents and vacancies should remain healthy, although recent record (and unsustainable) performance may ease further and have some negative periods, especially if there is a national recession in 2023. The supply underway before the outbreak will likely continue to add competitive pressure to the market. But once the attack is eradicated and a recession is in the past. The area returns to its expected long-term growth patterns, and sizable volumes of new apartments will likely be needed to satisfy the metro's expanding economy.
• Orlando's economy was amid a long-term expansion, driven by tourism, but supported by a diversifying local economy. Although the expansion was briefly paused due to the outbreak, the permanent expansion of the area's theme parks and non-tourism industries will support significant growth of the local economy and multifamily markets. Orlando would be rated higher if the tourism industry were less volatile and dependent upon national economic conditions.

Supply

Vacancy Rates

Rent  Growth

Source: Multifamily Economics and Research

Sources

• FannieMae
• Moody's Economy.com
• REIS
• CoStar
• Real Capital Analytics
• RealPage
• Dodge Data and Analytics SupplyTrack Pipeline
• Axiometrics
• CBRE-Econometric Advisors
• Yardi

 
 
 

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