After the challenging year that was 2020, the multifamily industry bounced back fairly well at the national level in the first quarter of 2021. Though the apartment demand recovery began in Q3 2020, national rent growth remained elusive throughout last year for obvious reasons. This dynamic shifted as the calendar turned to 2021 and average effective rent rose by 1% through the first three months of the new year. Of course, quarterly results were quite disparate between markets below the national averages. One market that stood out in a positive way was Tampa.
As always, numbers will refer to conventional properties of at least 50 units.
New Supply and Net Absorption
With more than 2,300 new units delivered in the quarter, new construction activity picked up compared to the same portion of both 2019 and 2020. Despite the increase in new supply, the activity was not particularly widespread across the market. Just over half of those new units were delivered in the Downtown – South Tampa submarket and only one-third of Tampa’s 15 ALN submarkets had any new supply.
An almost 30% increase in the number of new units delivered in the quarter compared to the first quarter of last year was met by a 77% increase in apartment demand. Approximately 3,100 net units were absorbed in the first three months of 2021, easily surpassing the mark from Q1 2019 as well. Interestingly, it was the Bradenton – Sarasota area that absorbed the most net units, almost 1,000, while the Downtown – South Tampa area managed to absorb less than 200 net units in the face of all the new supply. At the market level, the effect of the increase in new supply paired with an even larger increase in demand was an average occupancy gain of 0.5% in the period to cross 92%.
Average Effective Rent and Lease Concessions
Rent performance in the quarter was equally impressive. After average effective rent growth of right around 1% in the opening quarter of both 2019 and 2020, this year’s gain was 2.9%. This increase brought the average unit to $1,327 per month. Rent appreciation was strongest among the Class A properties. As a group, these properties added 4.9% to average effective rent. Even so, price classes B and C saw notable movement as well – increases of 3.6% and 2.5% respectively. Class D properties performed more similarly to the Tampa market as a whole from recent opening quarters with a 0.9% increase at the average.
One factor that aided rent growth was a draw down in lease concessions. This was an encouraging development as the industry continues to deal with the fallout from the pandemic. The availability of lease concessions fell by almost 20% among conventional properties across the Tampa market in the quarter. At the end of March, 14% of properties were offering a discount, which is slightly lower than the end of March 2020 leading into the pandemic. The average concession value also fell in the period to a similar extent. A 13% reduction brought the average discount value to roughly three weeks off an annual lease. This value remains somewhat elevated compared to pre-pandemic levels, but not by a huge margin.
Thanks in part to strong market fundamentals pre-pandemic, especially robust population and jobs growth, the Tampa market weathered the 2020 storm better than many markets around the country. The area has continued that momentum through the first quarter of this year, even in the face of increased new supply. Average occupancy rose and finished the quarter back above 92%, and average effective rent growth nearly tripled that of the opening quarters in either 2019 or 2020.
Given all this, and with the continued rollout of the COVID-19 vaccine and economic re-openings around the country providing a path to something resembling normalcy, the Tampa market appears well-positioned to enjoy a strong year in 2021.
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