Apartments 2Q 2014
Most major Florida markets have numerous multifamily projects underway. After the last seven year cycle, many are nervously asking: are there too many apartment units being built? While it is always possible, some say inevitable, for Florida developers to oversupply the market, the demand for new units may be deeper than some think. The number of units actually peaked in 2005 at 1,049,294 units according to the UF Bureau of Economics and Business Research. The number of units began to shrink as apartment projects were converted to condominiums. Further, new construction was limited as developers shifted their focus to more lucrative condominiums and townhouse developments. Apartment inventory hit bottom in 2008 at 955,326 units, fewer units than in 2001. Since then, less than 50,000 units have been added (less than 8,300 units per year). As Florida's population and employment recover there will be strong demand for new apartments. Clouding forecast models are the major structural changes in our economy such as home ownership rates dropping from 72.2% in 2005 to 67% currently, the unmeasurable shadow rental market of houses and condos, and the increasing surge of baby boomers. Projecting demand based on employment seems more reliable. Currently there is a ratio of roughly 7.5 persons employed for every apartment unit. Using this ratio and applying it to employment projections from the UCF Center for Economic Competitiveness indicates an average demand of 25,000 units annually over the next four years. This mirrors the annual demand from 2000 to 2005, of 25,998 units, before the boom and bust.
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