On Wednesday, AAGO hosted its annual "State of the Market" dinner meeting with a panel of experts from our market. They shared their insight, took a look into their "crystal ball," and also responded to questions from the audience. The information was outstanding and we wanted to share a few of the insights below.
Our panelists unanimously agreed that the industry is experiencing record occupancies and rent growth fueled by central Florida's employment and population growth. Kimberly Maggard, SVP, Operations with Royal American reported that the 22 communities that Royal American manages, which total 2,100 units, average 98% occupancy. The portfolio consists of affordable communities and rents are at the max level and each of them are on a wait list. McCarley Davis, EVP/CIO with Epoch Residential feels like Orlando is the place to build! He stated that Orlando is #1 in rent growth in the country, averaging 7% year over year. The Epoch communities in the market average 95% occupancy. Michele Brice, AVP with Lincoln Property Company says “Orlando is freaking awesome!” She added that the Lincoln communities are also enjoying both record occupancies as well as record rent growth. Luke Wickham, SVP with CB Richard Ellis said that Orlando is BOOMING! He reported that central Florida produces nearly 1,000 jobs per week and out of 1,100 people moving to Florida every day more than 200 are moving to central Florida. He says that demand continues to be greater than supply and that the shortage of units is one of our biggest challenges.
The audience was asked to participate in several live polling questions. When they were asked what their perception of the market was 80% believed that the apartment market was either “Freaking Awesome” or that "Life is Good."
The panelists were also asked which submarkets were the hottest. Luke said that the entire market was super tight, but if there were a few that stood out, those would be the Osceola/Kissimmee market as well as the Lake Nona market. The Lake Nona market is fueled in large part to Medical City. Michele added that both East Orlando/UCF and south I Drive were hot for Lincoln. McCarley shared that Altamonte and the SeaWorld/I Drive area were the strongest for Epoch. The Lofts at Altamonte had a 5% increase in rents over the last year alone. Kim agreed that the entire market was strong and added that the Osceola/Old Town area was hot.
Affordability of Housing
All panelists concurred that affordability is a significant concern in our market, and throughout the country. The consensus was that our affordable housing challenge is driven primarily by a lack of supply of both market rate and affordable units. McCarley said it was a crisis. He shared a story where a brand new affordable community in Orlando had over 8,000 applicants for only 200 units. Mr. Davis explained that developers cannot build without some kind of incentive and that building costs are what they are. He felt like the market needs more supply including apartments, single family homes, townhomes, etc.
When the audience was asked (via live polling) how much of a concern affordability was in our market 69% responded that it was "a huge concern."
Kim shared that while Royal American would like to do more deals, finding affordable land near public transportation, shopping, etc. is really hard to find. Luke reiterated that it comes down to supply and demand and there is definitely a shortage. Luke says that the average rent is $1,500 with $1.55 per square foot. The net average rent after concessions is $1,450. McCarly added that the Sadowski fund [Florida's 'dedicated' revenue source to fund affordable housing] continues to be raided and monies used on other priorities not associated with housing. McCarly complimented AAGO for creating the Developer’s Council which has been formed to help fight the numerous issues that face developers who are trying to build new units.
Future of the market
The final question of the night was “when will the market slow down?" McCarly does not think the market will slow in the near future, but if it does, it will be demand driven. Michele says the market continues to be “bullish." Kim felt confident that we will continue to see strong occupancies. Luke provided the final thoughts of the night, and said the market has been on a rocket ship since 2011. He doesn’t see the market slowing down in the next 5-10 years. Luke ended the night with “I would not bet against Orlando!”
I would like to thank everyone that attended and especially our ROCK STAR panelists for taking time to share their thoughts and insights.