Private capital buyers will be competing more aggressively with the publicly-traded firms this year for trophy properties now that interest rates have dropped and the supply of prime development sites is dwindling, the study notes.
For example, private buyers made up 69% of the market last year; pension funds and public companies comprised 22%; and REITs accounted for 9%. Foreign investment was shut out.
Although investment sales in 2000 were off nearly 50% from 1998 levels, Robert W. Miller, senior vice president in the Orlando office of CB Richard Ellis, tells GlobeSt.com, "Orlando's multihousing market is fundamentally sound." He says the area's diverse economic base created 41,400 new jobs last year, up 4.5%, and that's why he remains bullish on this market.
"Favorable rent trends and value appreciation result from the increasing demand for rental housing," Miller says. "Demand, in turn, is as robust in Orlando as any city in the Southeast due to the exceptional job and population growth." But the investment sales numbers from 2000 are nothing to pop corks over, he says. The average price-per-unit column was the only healthy barometer.
For example, 24 properties totaling 6,277 units sold in 2000 for an aggregate $308 million, or an average $49,093 per unit. In 1999, 38 properties comprising 9,481 units changed hands to the tune of $393 million or about $41,490 per unit. The high-water year, 1998, saw 47 sales comprising 13,803 units go for a total $585 million or an average $42,395 per unit.
Older properties fared better than more recent structures. For instance, apartment buildings erected prior to 1980 sold for an average $37,011 per unit last year versus an average $27,713 per unit in 1999. Multifamily buildings constructed between 1980 and 1990, however, sold for an average $41,858 in 2000 compared with an average price of $44,533 in 1999.
Although occupancies slipped to 93.2% from 95.3% in 1999, average asking rents continued to rise, hitting an average increase of 4.9% to $708 per unit, up from $675 per unit. "Rents will continue to increase but at more moderate levels than in the past," Miller tells GlobeSt.com. "There should be continued rent growth in older properties, but limited rent growth in newer, class A properties."
A total 12,590 new units were delivered in 2000 with a net absorption of 9,387 units out of a total inventory of 124,000 units. Miller doesn't expect the same volume in 2001. "Development has begun to slow due to the high levels of construction over the past two years," he says. "Developers, equity partners and lenders are approaching new projects with more caution."
Miller doesn't anticipate a rebound in 2001. "Continuing a three-year trend, we expect there will be fewer investment property sales in the Orlando market during 2001," he says but "this should result in increased competition for quality product."
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