With the economy running positive, demand for apartments running strong, vacancy declining and rents again on the rise, the market has taken substantial steps. Construction, the final step in the new cycle, is now stepping to the foreground as well. “[D]evelopers have been busy behind the scenes, lining up new projects for the past half year and swelling the planning pipeline,” states Marcus & Millichap’s third quarter 2012 report on the local market. “Searches for prime development sites were also intensifying as the second quarter progressed, adding to the likelihood that a significant development cycle will be under way by late 2013.”
Reis’ data concur. The 2012 market-rate completion total will consist solely of the 420-unit Camden Lavina project that completed in February at 9405 Dowden Road, Orlando, and the 232-unit first phase of the Colonial Grand Lake Mary project in Lake Mary, due on line in December. And only 514 such units completed all told in 2011. According to Reis’ early September report on construction, however, 1,401 market-rate units are underway. More are planned. Indeed, the firm’s second quarter analysis calls for the completion of 2,345 units all told in 2013 with more than 3,400 expected for 2014. New projects, meanwhile, move through the pipeline. A case in point are the two with a combined total of 458 units valued at $57.3 million to $61.8 million proposed for Maguire Road in Ocoee, the Orlando Business Journal reported in September. And groundbreaking was pending per the date of this report for a $63 million luxury high-rise in downtown Orlando named SkyHouse with 320 units from Novare Group Holdings and Batson-Cook Development Company.
Absorption numbers, meanwhile, have been high. First half 2012’s 420 units of new supply were met with 1,091 units of positive net absorption. 92 units followed in July. Vacancy ended the latest quarter at 6.2%, down 20 basis points for the period, down 160 year-over-year and well off the 11.5% cyclical peak reached in the first quarter of 2010. By the end of July the rate had slipped to 6.1%. Additional declines are expected. Measured by the year, growth in average rents returned to positive ground in 2011 following two years of small to moderate losses. Growth has accelerated since. At $889 and $834 per month, asking and effective averages for the latest quarter were up 1.0% and 1.3% for the period, rates of growth approximating those recorded for all of 2011. Increases of 0.3% followed for both rates in July.
Ongoing strong demand should lower the vacancy rate to 5.6% by year-end. Gains of 3.8% and 4.8% are projected for the mean asking and effective rents for the year. The new cycle of construction will become a chief factor in the market in the period ahead. Vacancies should stabilize in the vicinity of 5.5% by 2014 while rent growth runs in the neighborhood of 4.0% per year.