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8,000 apartments under construction in Tampa Bay as unemployment surges

‘Every real estate cycle is the same: We build, we overbuild and then we absorb,' says one real estate expert. Get ready to absorb.

ST. PETERSBURG — Throughout much of March, would-be renters regularly stopped by the leasing office of Vantage Lofts, an 11-story apartment tower under construction in St. Petersburg’s bustling Edge District.

Then, on April 1, Gov. Ron DeSantis issued his statewide stay-at-home order to stanch the spread of the coronavirus.

“Traffic almost came to a halt,’’ said Mark DeMaria, whose company is developing the 211-unit building. Although the first residents are still expected to move in next month, some potential tenants “fell off,’’ he said, worried they might lose their jobs.

Related: Coronavirus unsettles Tampa Bay’s residential real estate market

Before the pandemic began to sweep the nation, the Tampa Bay area was in the midst of an unprecedented apartment boom. Developers had completed 170 projects with a total of nearly 22,700 units in Hillsborough and Pinellas counties since the 2010 end of the Great Recession, according to the Tampa brokerage Franklin Street.

Still under construction are 34 projects with a total of nearly 7,900 units. The vast majority are in Tampa and St. Petersburg, where developers touted the appeal of walking from “luxury’’ apartments to scores of trendy new restaurants and other urban amenities.

A worker is seen wearing a mask while on a balcony of the Vantage Lofts Monday in St. Petersburg.
A worker is seen wearing a mask while on a balcony of the Vantage Lofts Monday in St. Petersburg. [ MARTHA ASENCIO RHINE | Times ]

Work continues at most of those apartment sites, including two towers in Tampa’s billion dollar Water Street project. But now the restaurants are closed. Gone are thousands of jobs, along with paychecks that supported rents sometimes approaching New York City levels.

Has Tampa Bay’s apartment market been overbuilt?

“It will be easy to say that in hindsight, but no, I don’t think we were getting overbuilt,’’ said Darron Kattan, an expert on multi-family housing. “The economy justified it, and nobody could have seen this coming.’’

Related: Here are the 25 most expensive Tampa Bay homes sold in 2019

Kattan, Franklin Street’s managing director, said several factors spurred the surge in apartment development: a shortage of affordable single-family homes and an “anti-ownership sentiment’’ after the 2008 housing crash; demographic changes as young people marry and start families later; and an influx of baby boomers moving to the bay area and becoming renters by choice.

Even before the coronavirus, Kattan said, bankers had started tightening up on loans for apartment projects.

“This will cause a slowdown in new construction,’’ he said of the pandemic. “Every real estate cycle is the same: We build, we overbuild and then we absorb. The reasons why are different but we will end up looking back and saying we overbuilt — in large part due to job losses – and we will enter the absorption phase.’’

The Vantage Lofts is seen under construction Monday in St. Petersburg.
The Vantage Lofts is seen under construction Monday in St. Petersburg. [ MARTHA ASENCIO RHINE | Times ]

Unlike in the Great Recession, when many projects came to an abrupt halt midway through construction as money dried up, apartment projects now underway or even in the final planning stages, are apt to proceed, Tampa real estate lawyer Robert Stern predicts.

But, he added, “I think most banks and most developers are taking a pause to see what the new world is.’’

If the coronavirus continues to spread, developers face the prospect of thousands of apartments hitting the market at a time of stay-at-home orders and massive unemployment. Will they have a hard time filling units? Will they have to offer bigger-than-usual incentives to move in? Will they have to charge lower rents than planned?

“Yes, yes and yes,’’ Kattan said.

So far, DeMaria of Vantage Lofts has held fast to his rent schedule, which starts at $1,250 for a studio with a balcony. That is less than at some of the other new apartment communities in the downtown St. Petersburg area. The building also has a large number of one-bedroom units, providing options for people wanting to downsize from bigger, more expensive apartments elsewhere.

“Our building lends itself well to a situation like this,’’ he said.

DeMaria, CEO of DevMar Development, said he had planned to come to Florida the weekend of March 13-15 to see the St. Petersburg Grand Prix and check on his project. But “that’s when the dominoes started to fall as the race and other events were cancelled. He has since been at home in hard-hit Michigan.

Although one subcontractor left the job because of possible coronavirus symptoms, the construction crew at Vantage Lofts is otherwise at 100 percent strength. All workers have their temperatures checked first thing in the morning. There are hand sanitizers and hand-washing stations on all floors, DeMaria said.

The leasing office remains open, but tours of the building with its roof-top pool are by appointment only. More than 20 leases have been signed thus far; two prospective tenants are in a holding pattern and “we will refund deposits of those with issues’’ related to the pandemic, DeMaria said.

A chief selling point for Vantage Lofts and two nearby complexes under construction was all the activity in the Edge District. The area is dead now, and “obviously this is a total game changer,’’ DeMaria said of the coronavirus. “Everything is going to be impacted.’’

Still, he expects businesses to come back, perhaps in different forms with less touching of products and close contact among customers.

“I think St. Pete is exactly the type of city and downtown that is going to do well because it’s walkable,’’ he said. “People now are sitting home and working at home. After a month or two, a lot of them are going to say, I don’t need the commute,’ and will be looking at apartment projects that have amenities and help people work at home.’’

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