Investors Broaden Search in Growing Tampa Bay Market
The Tampa Bay economy is gaining traction, stimulating the formation of new rental households and sustaining low apartment vacancy and consistent rent growth. A recent spate of hiring in the private sector has restored nearly 70 percent of the jobs lost during the recession, up from only 32 percent at the start of 2012. Home sales and home building have also revitalized, helping generate new jobs in employment sectors not directly tied to housing, such as retail. These trends supported positive net absorption in nearly all of the 15 quarters that have passed since the vacancy rate peaked, and specific segments of the rental market illustrate the favorable effects of a growing economy. Vacancy declined over the past year in the market’s one-bedroom apartments, an indication that more young residents are finding work and forming rental households. Additionally, lower vacancy in three-bedroom units illustrates a growing preference for a rental lifestyle over homeownership among many residents, which is also evident in a homeownership rate that has dipped into the mid-60 percent range.
Expanded access to acquisition financing and a pervasively optimistic outlook among investors supported by a strengthening economy and property operations are sustaining a heavy volume of deals in Tampa Bay. Properties in Hillsborough County remain a focal point for investors, but the increase in metrowide deal flow over the past year was spurred by a jump in deals in Pinellas County. Improving tenant demand has lowered vacancy in the county 350 basis points since hiring resumed three years ago, encouraging investor interest. Across the entire metro, investors continue to search for stabilized assets in areas with solid demand drivers. Cap rates for these properties have generally settled this year in the low- to mid-6 percent range. Employer expansions will also elevate investors’ interest in apartments near new employment hubs and may also shift the sights of developers. A recent decision by Amazon to locate a massive warehouse in Ruskin, for example, will likely generate interest in parcels in towns along Interstate 75.