The initial phase of a growth cycle is under way in Orlando, sparked by local companies that have finally decided to rehire employees. Over the past 12 months, 18,100 jobs were created in the MSA, a 1.8% gain. Local employers were expected to add 7,000 workers during the first quarter alone. By year's end, Orlando employers will move forward in the process of rebuilding staff s depleted by the recession, adding 23,500 jobs, a 2.3% gain compared to 2010 when only 15,600 positions were created. Job growth has prompted greater demand for apartment units, which has resulted in low levels of distress in that sector. The retail and office sectors, however, face higher levels of distress that financiers and investors will have to deal with over the next few years.

Apartment Sector to Outperform

The multifamily sector in Orlando has started to rebound, with vacancy dropping 3.6% over the past year and owners gradually starting to withdraw concessions. No additions to stock and strengthening renter demand combined to reduce vacancy by 70 basis points in Q1 to 7.9%. Owners continue to take advantage of recent improvements in tenant demand, raising asking rents 0.4% in Q1 to $842 per month. Concessions ticked down 20 bps to 7.8% of asking rents, following a 0.6% bump in effective rents to $776 per month. Vacancy will decline even further, dropping 150 bps to 7.1%, after plummeting 260 bps in 2010 on the release of pent-up demand. Asking rents will rise 2.9%, accompanied by a 3.5% increase in effective rents. No projects came on line in Q1 2011 and only 800 units are currently under way in the market. Planned projects total 8,000 units and represent about 7% of existing stock, but none are scheduled to start construction this year. About 1,000 units of multifamily housing were permitted over the past year, approximately two times the number in the preceding year but considerably less than the long-term annual average of 7,000 units. Developers will complete 400 units in 2011, down from last year, when 1,300 rentals came on line.