Florida Panhandle Multifamily Market Report

Pensacola Market Overview

Pensacola, located at the westernmost end of Florida’s Panhandle in between Mobile, Alabama, and Tallahassee, experienced a population growth of 1.1% annually in both 2021 and 2022 and is expected to have an average pace of growth of 0.6% between now and 2027. Notable sectors contributing to economic growth include finance, real estate, wholesale, and retail. The market is heavily influenced by the U.S. military, particularly Naval Air Station Pensacola, which employs a significant portion of the population. The city boasts multiple primary transportation routes, including state highways leading to Interstate 10, and is home to various educational institutions, including the University of West Florida and Pensacola State College.

Pensacola Market Performance

Rent growth is currently at -0.3%, but a rebound is expected by Q3 2024, with a return to meaningful growth by the end of the year, potentially reaching 2% to 3%. Construction in Pensacola accelerated notably in 2021, and although the pace has since moderated, approximately 1,000 new units are slated for completion by the end of 2024, driven largely by population growth in North Florida. The vacancy rate has risen to 13.9% over the past year due to the influx of new properties. Investment activity in Pensacola has been robust, consistently surpassing $150 million annually since 2017. Notable transactions in 2023 included the acquisition of the 237-unit Jennings Place community by Stockbridge Capital Group, LLC and MORE Residential for $68 million, the sale of the 137-unit Monarch Place project to Valor Equity Partners for $40 million, and the purchase of the 105-unit Dixon Preserve apartment community by a Door Property Management, LLC for $32 million.

Pensacola, FL | By the Numbers | Source: CoStar Group

• Vacancy rate: 13.9%
• Rent growth: -0.3%
• Delivered units: 1,610
• Absorbed units: 1,155
• Sales volume: $172M

Tallahassee Market Overview

Tallahassee, Florida’s state capital, the largest market in the state’s Panhandle, and the third-largest U.S. state by population, boasts a diverse economy centered around state government, finance, real estate, and professional services. Employment is expected to increase by approximately 0.6% annually, with a corresponding population growth of around 0.5%. Tallahassee offers incentives to businesses in targeted industries such as applied sciences, manufacturing, transportation, information technology, and healthcare. Tallahassee hosts three higher education institutions: Florida State University, Florida A&M University, and Tallahassee Community College. Together, they have a student population exceeding 50,000. The local economy benefits from the knowledge and talent cultivated by these institutions, as many graduates choose to stay in the area, contributing to employment stability.

Tallahassee Market Performance

Currently, the annual rent growth rate stands at 1.0%, and the average asking rent is $1,330 a month. The rental market in Tallahassee is projected to pick up speed throughout 2024, possibly reaching a growth rate of around 2% annually by mid-year. Vacancy rates in Tallahassee have been steadily increasing over the past year, soaring by over 300 basis points to reach 10.8%, and are expected to rise further by 40 to 50 basis points by mid-year. Currently, there are more than 2,600 vacant units, a surge of almost 50% in the past year, with another 290 units set to be added throughout Q2 2024. As of Q2 2024, there are 740 units under construction, expanding inventory by 3.2%. Notable transactions within the past year included the acquisition of Parkway Square and Tally Square, totaling $62.7 million, and the purchase of Serenity Court for $13 million, indicating a diverse range of investment strategies, including value-added potential and renovation plans. The 12-month sales volume stands at $136 million, with 90% of sales transactions completed through private buyers.

Tallahassee, FL | By the Numbers | Source: CoStar Group

• Vacancy rate: 10.8%
• Rent growth: 1%
• Delivered units: 952
• Absorbed units: 323
• Sales volume: $136M

Fort Walton Beach Market Overview

Fort Walton Beach, situated in between Pensacola and Tallahassee, has seen a robust population growth of nearly 20% since 2010, outpacing the national average nearly fourfold. Notable employment gains have occurred in the education, health services, construction, and hospitality sectors over the past year. The area’s economy is significantly bolstered by its military presence, notably Eglin Air Force Base, which boasts an economic impact exceeding $9 billion annually and employs over 74,000 personnel. This, combined with the region’s education facilities and diverse employment landscape, contributes to Fort Walton Beach’s attractiveness to both military veterans and civilian professionals, enhancing its skilled labor force. Fort Walton Beach hosts three airports, each serving distinct types of travelers. The Destin-Fort Walton Beach Airport handles commercial flights, Destin Executive Airport accommodates chartered flights, and Bob Sikes Airport serves as an industrial general aviation facility.

Fort Walton Beach Market Performance

Rent growth in Fort Walton Beach has remained negative for four consecutive quarters through Q1 2024, with the current annual pace at -2.3%. However, it is anticipated to reverse course in the latter half of 2024, potentially strengthening to around 3% by year-end and settling in the 3% to 5% range in 2025, aligning with historical averages. Vacancy in Fort Walton Beach has surged to 16.1% in Q2 2024, marking its highest level in a decade due to the influx of 1,100 new apartment units in the past year. In the last 12 months, Fort Walton Beach has seen a robust construction pipeline, with 1,100 units completed and another 2,100 units underway, poised to expand the market’s inventory by 18.2%.

The past 12-month sales volume stands at $155 million as of Q2 2024, driven mainly by a surge in investment activity during Q4 2023, where over $100 million in apartment trades occurred. Private investors have dominated this activity, comprising around 80% of total sales volume. Noteworthy transactions include the acquisition of the 288-unit Primrose at Santa Rosa Beach by Olympus Property for $83.5 million and the purchase of a three-property, 246-unit portfolio by LURIN Property Management for $41 million.

Fort Walton Beach, FL | By the Numbers | Source: CoStar Group

• Vacancy rate: 16.1%
• Rent growth: -2.3%
• Delivered units: 1,105
• Absorbed units: 274
• Sales volume: $186M

Panama City Market Overview

Panama City is the largest city between Pensacola and Tallahassee and has experienced significant population growth, nearly 10% since 2010 and 5.7% since 2020. This growth supports the nearly 5,000 businesses operating in Bay County, where the unemployment rate stands at 2.9% as of Q4 2023. The area’s economy, driven by sectors like mining, logging, construction, education, health services, and government, is expected to continue growing, with the military presence, including Tyndall Air Force Base and Naval Support Activity Panama City, playing a significant role. Additionally, tourism contributes substantially to the local economy, generating over $3 billion in direct spending and supporting thousands of jobs.

Panama City Market Performance

Panama City’s multifamily market has shown stability compared to other areas in Northwest Florida, with rent growth patterns deviating from those seen in the rest of the state during the pandemic. Projections suggest a significant rebound in rent growth, potentially exceeding 5% by the end of 2024, with a more sustainable pace of 3% to 4% growth anticipated in the following years. The lower-tier rental units are already experiencing growth at a favorable rate of 4.6%, indicating potential for further increase, especially considering the significant price gap between these units and higher-end properties. Despite the delivery of over 830 new apartment units in the past year, vacancy has only decreased slightly by -0.5% to 10.5%, primarily due to the brisk pace of apartment demand, almost matching the rate of new unit completion. Approximately 820 new apartments were completed in the past year, with another 1,000 units currently under construction across the broader market.

As of Q2 2024, the trailing 12-month sales volume reached $110 million, with notable transactions such as the sale of the 320-unit Panama Flats apartment community and the acquisition of the 152-unit Artisan Living Grand Lagoon townhome apartment community. Both transactions involved private and institutional investors, which have been the most active buyer types in Panama City in recent years.

Panama City, FL | By the Numbers | Source: CoStar Group

• Vacancy rate: 10.5%
• Rent growth: 0.7%
• Delivered units: 818
• Absorbed units: 792
• Sales volume: $110M