In the near absence of new construction, a variety of factors contributing to demand—job growth, issues in the ownership markets and population in-migration—have combined to tighten the market and to usher in the return of positive rent growth. While not truly low by national apartment market norms, vacancy ended the second quarter at 8.4%, down 40 basis points for the period, down 140 year-over-year. Indeed, market-rate net absorption through the first half of 2012 was counted at 597 units with no new supply delivered. The net total for the second quarter alone was 236 units. Rent growth, moderately positive overall through recent quarters, has accelerated. At $810 and $776 per month, asking and effective averages per the latest quarter were up fully 1.2% and 1.4% from the quarter before following first quarter’s smaller gains—and following respective growth rates of only 0.3% and 0.6% for all of last year. July followed with a small negative net absorption total, which should soon be erased, a 10-point increase in the vacancy rate and growth at 0.2% for both average rents.
These favorable factors have set the stage for a new round of development. While only 252 market-rate apartments will comprise the 2012 construction completion total, all in the Cabana Club Apartments at 8680 Baymeadows Road E., which completed in September, a host of new projects are moving forward. Per the date of this report, 1,238 market-rate units were underway in five projects, all in the Southside/Baymeadows and East Jacksonville submarkets. Among these, the latest to break ground was a 280-unit unnamed development at J. Turner Butler and Southside boulevards in east Jacksonville, which started in September 2012. Reis expects a November 2013 finish. In the Southside, construction of the 240-unit Class A Terrace at Town Center from The Morgan Group commenced in July, Business Wire reported at the time. While Reis does not specify a completion date, move-ins are expected to begin as early as this December, according to Business Wire. The project’s proximity to “one of Jacksonville’s largest employment areas” and to St. John’s Town Center are seen by the developer as significant assets. Along these lines, Marcus & Millichap cites low vacancy in new complexes in the Town Center area.
The largest of the projects currently underway is the 396-unit Seagrass Apartments complex from Julian LeCraw & Company LLC on Atlantic Boulevard in the East Jacksonville area. The original projected development cost was $48 million, according to Reis Construction Data. A completion date had not been specified per the date of this report. Meanwhile, three market-rate projects with a combined total of 822 units are scheduled to break ground during the fourth quarter of this year.
Reis expects rent growth rates of 3.2% asking and 4.4% effective for 2012 as a whole. Vacancy should end the year under 8.0% as demand again picks up following July’s brief downturn. By 2013 the new cycle of construction should be adding increasingly large volumes of new supply. The tightening of occupancy and strong rent growth, however, should persist. According to the latest analysis, vacancy under 7.0% is expected by the end of 2015.