November 7, 2024

Multifamily Transaction Counts Ahead of the 2023 Pace in Tampa

Q3 2024

Multifamily operating conditions in the Tampa region were mixed in recent months, with rents ticking higher for a second consecutive quarter while vacancies posted modest increases. More than 10,300 rental units have come online since the beginning of the year, with additional projects in the development pipeline, although recent storm activity will likely result in construction delays. The current rate of development has been applying upward pressure on vacancies, though high levels of renter demand have limited the rise. Net absorption has totaled approximately 8,000 units year to date, similar to levels recorded during the same period in 2023. At the market level, rents have been soft, but a few submarkets such as Central St. Petersburg and University North have posted annual gains between 2 percent and 2.5 percent.

Sales activity picked up from the second quarter to the third quarter, and transaction volume in 2024 continues to outpace the limited levels recorded in 2023. Total sales to this point in the year are nearly 30 percent ahead of the pace recorded last year. Still, recent transaction volumes remain below the area’s long-term trend. Investors are currently favoring newer properties, with assets built since 2019 accounting for nearly half of the total transactions that have closed year to date. Investors have been active in the Central Pinellas, Pasco County, and South Tampa submarkets during the last nine months; nearly half of the total properties that have changed hands year to date have been in one of these three submarkets. This is a shift from last year when North Pinellas and Southeast Tampa were the leading submarkets for transaction volume.

Looking ahead

The Tampa multifamily market showed signs of improving. In the near term, Hurricane Milton will impact the development pipeline, as projects that were previously scheduled for delivery in the fourth quarter may be pushed into 2025, and projects that are earlier in their development stages may be delayed even further. Absorption should remain positive, and operating fundamentals should keep within close range of current levels as demand remains strong for these new units. This consistent demand should keep rises in vacancy to a minimum. Rents could maintain their trajectory as well, likely inching upwards from current levels.

While sales velocity may slow significantly in the coming months, transaction volume in 2024 will still outpace the limited levels recorded last year. Roughly half of all sales this year have been properties built in the past five years, a trend that should continue as completions create acquisition opportunities for investors. In addition, the region’s Class B properties will continue to attract attention; these assets typically make up more than half of the multifamily property sales in a given year.