According to Freddie Mac’s Multifamily Report, several Florida markets are expected to produce the highest multifamily property revenue increases in 2019 due to strong population growth and relatively tight vacancy rates.
The Jacksonville economy has flourished tremendously in recent years. The city’s real gross metro product increased by an estimated average of 3.7% annually in the five years ending 3Q 2018, and it is ranked among the top metros for percentage of inventory under construction. In the year ending 3Q 2018, rents in Jacksonville grew 5.7%, the fourth best performance among the nation’s top 50 markets. Likewise, the city’s population and employment growth has contributed to the increase in household formations within the market. These households are some of the strongest earners in the country; from 2012 to 2017, median household incomes in Jacksonville increased 20.9%, well above the national average of 17.5%. Given these dynamics, Jacksonville’s tremendous increase in population and wages will be able to absorb the deliveries and rising rents.
According to the U.S. Census Bureau, Florida was the second fastest-growing state, adding nearly 380,000 new residents in 2018. Furthermore, the state has seen incredible job growth over the past few years. As a result, we have seen an uptick in new construction. Also, in the last three years, the largest MSAs alone have added over 34,000 units. Currently, there are over 180,000 units either under construction or proposed statewide, and growth is projected to continue at record levels. Jacksonville, Orlando, and Tampa – in particular – are projected to have high population and net employment growth over the next three years and we expect to see a lot of activity in these metros.
It isn’t just Disney World employees that are driving the workforce! The biggest job growth in Central Florida has been concentrated in the leisure and hospitality industry, as well as healthcare, manufacturing, and construction. In South Florida, we are beginning to see an influx of more sophisticated sectors migrating from the northeast, such as financial services and STEM. This will be a huge boon to the area, especially with increased tax burdens faced by businesses in states such as New York, Connecticut, and New Jersey.
Florida benefits from a booming economy more than most states. The strong national economy provides a lot of liquidity for investors in the multifamily sector. Furthermore, it is keeping interest rates at relatively low levels, allowing investors to be aggressive regarding their cost of capital. In terms of the tourism industry, it continues to be an important economic driver in the sunshine state. Indeed, over the past seven to eight years the state has seen consecutive years of record visitation and visitor spending, and in 2018 alone, over 100 million people visited Florida. This has undeniably been fueling job proliferation in cities like Orlando, where the leisure and hospitality sector accounts for one of the largest parts of total employment. However, the state economy has been diversifying. As businesses and workers continue to flee states with fewer prospects we expect the economy to only continue diversifying.
To read more about the state of the multifamily market, download the spring edition of our Multifamily Outlook Report.
Walker & Dunlop is one of the largest multifamily finance lenders to property owners.