The recovery in apartment operations that began last year in Orlando is expected to accelerate in 2011 amid lingering uncertainty in the housing market and a rebound in tourism.
During 2010, ongoing single-family home foreclosures lowered the homeownership rate from approximately 72% to 68%, according to Marcus & Millichap Real Estate Investment Services, prompting the movement of many former homeowners into the renter pool.
The likelihood of additional home foreclosures will further expand the renter base throughout 2011, projects Marcus & Millichap. Meanwhile, an improving job market bodes well for apartment owners and managers.
Approximately 8,000 leisure and hospitality jobs are forecast to be created this year as theme park attendance continues to recover and foreign tourist volume increases due to a relatively weak dollar.
Additionally, the expansion of local medical facilities will support the hiring of 4,400 education and health services workers during 2011, generating Class-A apartment demand in Orlando.
According to Marcus & Millichap, developers are expected to complete only 700 units in 2011, down from 1,300 units last year and well below the five-year average of 2,000 rentals.
Projected net absorption of 2,100 units is forecast to push down vacancy 120 basis points this year to 8.4%. The vacancy rate decreased 160 basis points in 2010.
During 2011, asking rents are projected to rise 2.2% to $864 per month, according to Marcus & Millichap. Concessions are forecast to decline 50 basis points to 7.8% of asking rents as effective rents grow 2.8% to $797 per month.