Investors are attracted to the fundamentals underpinning North and Central Florida’s multifamily market for good reason.
Even before the pandemic, Tampa and Orlando — the region’s two largest metros — were in growth mode, with large corporate relocations and expansions driving demand for housing. Florida’s population surge between 2020 and 2022 accelerated that process. The state had the highest net migration increase in the country, gaining about a quarter of a million new residents in 2022 alone.
Orlando and Tampa ranked fourth and fifth, respectively, among the top 10 metros nationally for population growth between 2022 and 2023, according to the U.S. Census Bureau.
The thesis for investing in Jacksonville and Florida’s Panhandle region also has strengthened since 2020, driven by strong job growth in the government, manufacturing, technology and tourism sectors, along with the region’s relatively low cost of living compared with other markets in Florida.
Employment growth, low taxes, a great climate and attainably priced housing are an attractive value proposition to renters. Although the cost of housing has gone up since 2020, average rents are still competitive with markets in the Northeast and West and are less expensive than South Florida, where skyrocketing housing costs have triggered in-state migration to the northern half of the state. For example, in the third quarter, there was more than a $1,000 difference between effective rents in South Florida ($2,520) and Jacksonville ($1,455).
Despite these favorable fundamentals, multifamily deal volume was well below normal over the past 18 months due to higher interest rates, higher operating costs and a stubborn bid-ask gap. Between January 2023 and June 2024, multifamily property transactions in Central and North Florida totaled just under a billion dollars at $957 million, compared with $4.1 billion from July 2021 to December 2022.
There was a notable shift over the summer and fall, however, with many multifamily buyers re-engaging and looking for opportunities to put their dollars to work.
Markets to Watch
Across Florida, the mass in-migration trend spurred double-digit rent growth. For example, in Orlando, effective rents grew by 27 percent between the second quarter of 2021 and 2022, while in Tampa, rents grew by about 30 percent.
Developers seized on this opportunity and broke ground on thousands of new apartments between 2021 and 2023, resulting in record-breaking new deliveries in nearly every major Florida metro this past year.
In Tampa, more than 14,000 building permits for multifamily were issued in 2022, contributing to deliveries of approximately 11,000 units in 2024, accounting for the most annual deliveries in the past two decades. In Orlando, more than 15,400 units are scheduled to come online this year, another record high.
Both metros are absorbing the new supply quickly, causing a slowdown or decline in rent growth in some cases. Although Tampa’s absorption (9,225 units) was trailing deliveries (11,668 units) by the third quarter of 2024, the Tampa-St. Petersburg area is projected to have a net in-migration of 97,000 people between 2024 and 2026.
Effective rent in Tampa was down 2.7 percent year-over-year as of the third quarter of 2024, to $1,806 per month, with occupancy at 93.2 percent.
In Orlando, apartment leasing is brisk due to a flourishing labor market and low for-sale housing inventory. As of the third quarter, effective rent was down 1.8 percent year-over-year to $1,773, with an occupancy rate of 93.7 percent. However, sustained job growth in the hospitality/tourism, private education and healthcare sectors is expected to propel demand for years to come. The region posted a 3.2 percent growth in households over the past 12 months.
Smaller Metros Are Investment Dark Horses
Markets in Central Florida. For example, previously rural areas like Ocala, which is vying with Wellington to be the center of the equestrian world, and The Villages, a longtime retiree hot spot, have seen explosive population growth and demand for rental housing. It’s the same for Florida’s Space Coast, where companies like SpaceX and Blue Origin are creating thousands of new jobs and generating housing demand.
The city of Jacksonville is enjoying a renaissance as well, driven by corporate relocations and proactive economic development efforts by the city. Jacksonville’s outsized job and population growth between 2020 and 2023 earned it the title of the second-hottest job market in the United States by The Wall Street Journal and Moody’s.
In the past five years, more than 50 economic development projects have been announced, including Swedish fintech company Medius relocating from New York City to Jacksonville, and BAE Systems’ new $200 million ship repair facility the company is constructing at the Jacksonville shipyard.
There are nearly $8 billion of new projects in the pipeline as part of a major downtown revitalization effort. These include projects like the $750 million Pearl Square by Gateway Jax, which broke ground in November and will consist of 1,250 residences, 200,000 square feet of retail, 150 hotel rooms, and some open space upon delivery in 2026.
Affordability remains one of Jacksonville’s chief selling points. Effective rent here declined by 3.5 percent annually to $1,445 between the third quarters of 2023 and 2024.
Absorption, however, is quickly catching up to deliveries, and strong job growth should push the market toward equilibrium by early next year. There were more than 8,000 units absorbed over the past four quarters and 17,400 new jobs created in that same time period. Household growth is up 1.8 percent, higher than the national average of 0.3 percent.
The Florida Panhandle region, which includes the state capital of Tallahassee and the nearly 1.2 million people located along the coastal cities of Pensacola, Fort Walton, Destin and Panama City Beach, is the largest and most geographically diverse of Florida’s markets.
Although a wave of new supply from 2021 to 2023 has led to a moderation in rent growth, driving fundamentals such as tourism, a diverse workforce and a strong military presence foster a stable environment for rental demand across the Florida Panhandle.
With a population over 530,000, Pensacola is the largest MSA in the Florida Panhandle. Here, inventory only rose 3.6 percent year over year, allowing year-over-year effective rent to climb 5.2 percent to $1,537 on average.
The U.S. military contributes significantly to the economy of Panama City, Fort Walton Beach and surrounding areas like Destin. Fort Walton is home to Eglin Air Force Base, the largest Air Force base in the world, which, combined with Tyndall Air Force Base and others near Panama City, create one of the largest military base footprints in the nation.
Stretching 50 miles from Mary Esther to Rosemary Beach, the Fort Walton Beach market inventory has expanded by 13 percent, with 1,900 units completed in the past year and another 1,700 new apartments still under construction, according to CoStar.
While current rent growth has been flat and average market rent has settled to $1,790 per month, this market is known for its luxury real estate and has produced several pricey multifamily trades peaking at $360,000 per unit in Capital Square 1031’s $46 million acquisition of The Residences at 393 North in Santa Rosa Beach in 2021.
Previously, supply constrained markets like Panama City Beach experienced 9.7 percent rent growth back in 2019, but developers have been very active since then. In fact, nearly 35 percent of all apartments in Panama City were built after 2019, according to CoStar, with more than 1,200 new units delivered in the past 12 months. Construction starts have tempered the rise in rents and occupancies as the market absorbed the new units over the past three years.
While rent growth has only recently recovered from negative territory, it is projected to strengthen considerably moving through 2024, with the potential to reach the 3 percent range by the end of the year.
As the state capital and home to major universities like Florida State University and Florida A&M University, Tallahassee continues to enjoy a stable rental market fueled by students and government employees.
Effective rent rose 2.6 percent year over year to $1,437 at the end of the third quarter of 2024, and employment also grew by 2.8 percent. The strong underlying fundamentals along the Emerald Coast, coupled with diminished supply and lower buyer competition as compared with other major Florida markets, continue to make the Florida Panhandle an attractive opportunity for future investment.
BTR Booms in Central Florida
Central Florida was one of the top markets in the country for new build-to-rent (BTR) home construction during the past several years.
The BTR model works particularly well in this area due to the region’s ample land availability, enabling developers to create suburban-style, single-family or townhome communities complete with parks, pools and other amenities.
Orlando now ranks 16th in the nation for BTR construction, with 449 purpose-built rental units added last year, according to Rent Cafe. Rent growth for this product is expected to be around 4 percent in markets like Tampa, Orlando and Jacksonville this year, and there were several sales of BTR communities to institutional investors in markets around Orlando, including Sarasota, Kissimmee and the Space Coast, in 2024.
Optimistic Outlook for 2025
The investment community is cautiously optimistic about North and Central Florida’s multifamily market moving into 2025. On the one hand, the real estate fundamentals are strong, inflation has cooled, insurance rates are also trending downward and more groups are bidding on properties. There is a flight to quality, with institutional capital focusing on the major metros, where market size and economic diversity provide a degree of safety.
Interest rates, which had been going down, were back up at the time of writing. The U.S. 10-year Treasury yield was 4.5 percent as of Dec. 18, up from 3.62 percent on Sept. 16.
Additionally, some volatility is likely as economists and investors get a better handle on how some of incoming President-elect Trump’s policies will impact inflation and deficit spending.
The Live Local Act, which was adopted in 2023 to help address Florida’s ongoing affordable housing shortage, also appears to be working its way into deals with positive results.
Owners whose properties qualify have been able to reap sizable tax abatements that will lower operating costs and help offset some of the increases of the past few years.
Although it may not be until early 2025 that we see deal volume pick up substantially, North and Central Florida’s real estate market is poised for long-term stability, driven by a more diversified economy, migration from both within and outside of Florida and abundant land for future development.
— Greg Rainey is a director in Berkadia’s Jacksonville office, and David Etchison is a managing director based in Orlando. Both focus on multifamily across Central and North Florida. Berkadia has six offices in Florida.
