Jonathan Graber had spent 18 months sharing a rental home in Tampa with a friend, and he was tired of it. He wanted a place of his own. But he did not want the strings attached to owning a home. ¶ So the 28-year-old joined the growing ranks of bay area residents migrating to apartments. Graber now calls home a one-bedroom, $900-a-month apartment in South Tampa. ¶ "I am on my very own, finally," he said. "I don't want to be tied down to one place."
Booming demand for multifamily housing has lowered bay area vacancy rates, pushed up rents and driven investors to snap up apartment buildings the moment they hit the market.
Local experts attribute the rebound in what was a stagnant market to the rising rents and the lack of new construction during the housing bust. Lenders have become more willing to loan money in the multifamily sector, viewing it as a safe investment amid the turmoil roiling the economy and financial markets.
Also fueling demand: People who moved back home with parents or shared homes to save money during the recession are now returning to the apartment market.
"People are flocking to multifamily real estate," said Darron Kattan, a managing director at Franklin Street, a Tampa-based full-service commercial real estate firm. "People are hungry for that product."
The firm has closed 16 multifamily deals in Florida this year. Kattan expects the pipeline of distressed properties to wither away by 2012, opening the door for more new construction.
In 2010, 134 buildings with 10 or more units sold for $956 million in the bay area with an average price of $60.42 per square foot. That's compared to 76 sales worth $430 million through July of this year with an average price of about $120 per square foot, according to CoStar Group, which does commercial real estate analysis.
After the multifamily sector went south in 2006, apartment owners enticed renters by dropping security deposits and offering rent-free months. Now, those giveaways are virtually gone.
Numbers on the Tampa Bay area from Real Data Apartment Market Research in Charlotte, N.C., define the trend in multifamily housing:
• The average rent went from $822 a month in May 2010 to $838 a year later.
• The vacancy rate dipped from an all-time high of 10 percent in May 2009 to 7.5 percent in May.
• Construction began on 1,528 multifamily units in the first six months of this year. An additional 2,359 units were already under way with an additional 2,280 units proposed. Eight to 10 more properties are under contract for new multifamily units.
"Developers are back," said Bill "The Dirt Dog" Eshenbaugh. "Some tell us they can get financed."
The Eshenbaugh Land Co. sold enough land since last year to hold another 3,680 multifamily units in the bay area. The key for new construction is that developers need equity in order to get financed since government incentives dried up, Eshenbaugh said. He cautioned that some deals have cooled because of the recent softness in the economy.
During the housing boom, single-family homes were considered the best use for vacant land, but that is no longer the case.
With hundreds of vacant acres scattered about the area, Kelly Prior, director of land services for Colliers International in Tampa Bay, said some owners are exploring whether to rezone the properties for multifamily units. He said many cash deals close in less than 30 days, some even faster, adding: "It's an opportune time."
Investors are targeting properties with middle to lower rents, instead of luxury buildings. Many high-end buildings are not for sale. The lower rents at the older buildings also translate to higher occupancy rates.
Rising gas prices are pulling renters closer to urban centers like downtown Tampa and St. Petersburg and near high-traffic shopping centers. Locations near expressways are getting the most interest. South Pinellas has more than 600 units under construction — the most in the bay area.
The housing bust drives sales of multifamily properties. People who lost homes in foreclosure typically have to wait three years to buy another home since lenders tightened borrowing standards. As the foreclosure crisis shoved many people into apartments, the negative stigma attached to renting disappeared.
"People are renting by choice," said Bruce Erhardt, executive director of land brokerage for Cushman & Wakefield in Tampa. "They want to be able to lock it and leave it."
Graber, a leasing representative for Sembler Co., agrees.
He enjoys apartment life because he isn't responsible for repairs or cutting the lawn. He is involved with many professional groups and enjoys the freedom of coming and going.
Given the bumpy economy, Graber said, it's much easier to leave the region without selling a home, adding: "The flexibility is important."
Mark Puente can be reached at email@example.com or (727) 893-8459. Follow him at Twitter at twitter.com/markpuente.