Multifamily Market Overview

Orlando, FL

The multifamily market in Orlando is expanding quickly due to steady inbound migration and job growth. Even in the face of economic headwinds, it continues to rank among the top performers in the country. Rent growth through the beginning of 2022 was driven by solid renter demand from new residents and those priced out of the single-family market. However, the pace of rent growth has been quickly normalizing, and development continues in key areas while vacancy hovers around seven percent. As more people move to the Sunbelt, population growth is anticipated to stay strong in the coming years; necessitating increased new supply. There was substantial investment activity and significant sales volume throughout 2022, which can be attributed to the area’s solid fundamentals.

Highlights

• In the last 12 months, the city has seen 100 property trades totaling $6.7 billion in total investment volume.
• Market cap rates have fallen to 4.1% in the past year.
• Almost 2,800 units have been absorbed in the last 12 months.
• The average price per unit increased by over 20% to its current level of $270,000/unit, highlighting just how intense the multifamily investment activity has been in Orlando.

Rents | Vacancy | Construction

Despite having only 0.8% of the country’s population, Orlando is home to approximately 2.5% of the units now under construction nationwide to keep up with ongoing renters’ demand.  

Recently, Orlando has experienced significant renter demand; despite seasonality influences on the rate at which units are being absorbed. During the last 12 months, demand has increased, bringing the vacancy rate down to 7.7 percent. Throughout 2023, the vacancy rate is anticipated to fluctuate between seven to nine percent. This fluctuation results from the impact of additional supply that will be added during the year. The Orlando rental market has experienced dramatic year-over-year rent growth. This growth has been so strong that several tenants have already priced out of the single-family home market and are now having trouble finding apartments. Orlando’s average rent is $1,790 per month, significantly more than the national index of $1,630. Despite the sharp increase in prices over the past year, Class A rents are still well below the U.S. average of $2,080 per month for comparable units at $1,950/month. The multifamily market in Orlando has grown as a result of both significant inbound immigration and new household formation. Although rent growth has slowed from an astronomical 24 percent in December of 2021, it still outpaces the national average, finishing the 2022 year around a relatively high 9.5 percent year-over-year. The desire to invest in Orlando, coupled with the strong fundamentals of the multifamily asset class, has allowed demand to remain strong during a high inflationary period within the market. To address this demand, there are 23,000 additional units in the pipeline; however, they are unlikely to completely balance the supply and demand that is still searching for equilibrium. Several new developments are currently being built in the Orlando MSA, increasing the available inventory by 11.8 percent.

Sales

Orlando, by the numbers in the past 12 months

• 12-month absorption units: 2,843
• 12- month units delivered: 7,791
• Average vacancy rate: 7.7%
• Average asking rent: $1,790
• Average price per unit: $270,000
• Sales Volume: $6.7 billion

Despite rising interest rates and mounting pressure for cap rates to decline, the demand for multifamily investments in Central Florida is still strong. Over the past year, several noteworthy deals have closed, showing the newfound resilience of Orlando’s multifamily sector. The area has experienced $6.7 billion in sales volume within the past 12 months. The ongoing competition for multifamily assets has brought competition from private equity and JV groups from all corners of the country. Over the past eight quarters, there has been a sharp increase in apartment transactions valued at over $100 million, with 26 transactions in 2022, comfortably outpacing the 18 that closed in 2021. This surge in extensive transaction activity is primarily attributed to private equity firms’ greater desire to find investments in Orlando. In addition, a few sales in the past year over $150 million had prices per unit above the $400,000 mark. Over the past year, significant investor equity has continued to pour into Central Florida with little to no signs of slowing down. With strong market fundamentals and an asset class often seen as a hedge against inflation, the Orlando apartment market is poised to grow steadily in 2023. As interest rates stabilize, an already strong investor pool will increase in size.

The average price per unit has grown by over 20% to a current $270,000/unit.