The Tampa metropolitan statistical area is expected to record 2.4% employment growth in 2004, a gain of 30,000 jobs. That activity "will fuel demand for apartments as the market for first-time homeowners will also begin to lose steam," says Hessam Nadji, managing director, research services at Marcus & Millichap.
Institutional and private investors are noting the new trend already as per-unit prices rose to $48,000 in 2003 from $46,000 in 2002. Hillsborough County is outpacing Pinellas County in sales activity, garnering 60% of the metro area's sales volume. The average property sold in Hillsborough had 150 units compared to 75 units in Pinellas.
"Properties in Pinellas County tend to be smaller due to the difficulty of securing large parcels for development," Nadji says.
The limited availability of land helped the South Pinellas County submarket post a median price gain of 6.6% in 2003, to $52,500 per unit. The Hillsborough media price-per-unit was also up, from $37,500 in 2002 to $44,000 in 2003. "Investors were encouraged (in Hillsborough) by the greater number of accessible employers due to the county's centralized location," the Marcus & Millichap researcher says.
He predicts areas closer to employment centers, such as the Tampa CBD and Westshore submarkets, will record pricing gains over the next two years "as employment growth becomes stronger and fundamentals are stable."
Overall sales volume reported in 2003 topped the previous year "despite the fact that potential buyers have outnumbered sellers for at least the past year, pushing up prices and lowering cap rates," Nadji says.
Cap rates that hovered near 9% in 2002 are now in the 8% to 8.5% range. For most of 2004, he expects sales activity "will remain strong, with more small investors drawn to the multifamily investment market by improving fundamentals, low interest rates and consistent returns."
On the rental rate front, Nadji anticipates asking rents should continue climbing in 2004, from an average $722 per month to $731 per month, an increase of 1.2%. He says effective rents were flat in 2003, at an average $660 per month, but are expected to rise this year "as owners sense improvement in the market."
Vacancy is expected to rise to 8.4% in 2004, just 10 basis points above the 2003 level of 8.3%. Vacancy climbed from 8.6% in 2002 to 9.6% in first quarter 2003 "but retreated rapidly later in the year as employment accelerated," Nadji says.
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