Tampa Economy Continues to Grow at a Brisk Pace

Tampa | MULTIFAMILY OUTLOOK | December 2017 (download full PDF report here)

The Tampa economy continued to grow at a brisk pace in September 2017 . A growing local economy is in line with growing rental rates, which are expected to rise along with new housing demand. Vacancies are expected to decrease as newly constructed units are slow to enter the local market. 70s and 80s vintage product remain popular with renters due to attractive rents. Regional private investors are the main active buyers in Tampa, targeting higher yields. We thus have the strategic opportunity to purchase multifamily properties in Tampa.



According to the U.S. Census Bureau, the U.S. nationwide homeownership rate in the second quarter of 2017 remains near its lowest level of the past two decades at 63.7% , contributing to the increase in demand for apartments nationwide. Tighter credit standards have restricted the number of new single family homebuyers. As a result, the multifamily sector continues to experience sustained growth and tenant demand for multifamily housing is on the rise , according to the National Multifamily Housing Council.

According to the Bureau of Economic Analysis , Tampa’s population of 3,032,171, ranked 18th in the United States in 2016. Tampa is ethnically comprised of approximately 25.8% percent Hispanic, 46.4% percent White, 22.0% percent Black, three percent Asian American, and two percent Multiracial according to the U.S. Census Bureau .

In 2016, Tampa’s per capita real GDP was $43,807 , according to the U.S. Bureau of Economic Analysis.

Tampa has a diversified economy primarily focused within finance, retail, health care, insurance, shipping by air and sea, national defense, professional sports, tourism, and real estate. Tampa continues to grow with the planning of a “9-million-square-foot, $3 billion dollar mixed-use project on the south side of the city’s downtown that will employ more than 15 architecture teams, designing more than 20 buildings. The first phase is slated to be complete by the end of 2020” . In February 2017, Forbes ranked Tampa-St. Petersburg-Clearwater as the eight fastest growing city in the U.S. and Tampa is ranked fifth for projected wage growth.

The employment rate in Tampa has been on an upward trend since 2010. As of September 2017, the unemployment rate in Tampa was 3.3%, down from 4.9% in June 2016, according to the Bureau of Labor Statistics . Tampa’s unemployment rate is below the Florida State unemployment rate of 4.3%, according to Bureau of Labor Statistics data .

Workers in the Tampa-St. Petersburg-Clearwater Metropolitan Statistical Area had an average mean hourly wage of $21.88 in May 2016, according to the Bureau of Labor Statistics. Local employment in Tampa is most highly concentrated in seven of the 22 occupational groups, including office and administrative support, sales and related, and business and financial operations.


According to the U.S. Bureau of Economic Analysis, wage and salary employment has grown steadily year on year from 2010 to 2016, as in Figure 4 below. Wage and salary employment measures the average annual number of full-time ad part-time jobs in each area by place of work. All jobs for which wages and salaries are paid are counted.

Due to Tampa’s strong presence of finance, healthcare, insurance, shipping by air and sea, national defense, professional sports, tourism, and real estate, the economy continues to grow in Tampa.

“Hiring in the professional and business services sector boosted overall job growth in the Tampa Bay-St. Petersburg metropolitan area” during the past year . Professional and business services employers led job creation in the first eight months of 2017 by adding 16,200 net workers to the Tampa Bay workforce . Overall, the metrowide labor force grew by 39,600 positions, to expand 3.0%. The local increase outpaced the national increase of 1.4% during the same period. In addition to the professional and business services sector, the construction industry continued to have over-sized growth, expanding at 10.5% year over year . 3,200 net jobs were added in the trade, transportation, and utilities sector, creating a 1.3% expansion.

The most significant employers in the Tampa area are Publix, Bay Care Health, Hillsborough County School District, and the University of South Florida. Exhibit 7 below shows Tampa’s largest employers, employees, and associated industry.

Tampa continues to participate in the upward demand for multifamily housing. According to the US Census Bureau , median monthly gross residential rent in Tampa between 2012-2016 was $983 and the renter-occupied housing unit rate between 2012- 2016 was 51.6%. According to the Department of Numbers, the real gross rent in Tampa was $976 in 2015, a +2.52% increase from the year prior.

Occupancy rates in Tampa have increased over the past year, bringing the rental vacancy rate to 6.77%, according to the Department of Numbers.

Developers delivered 3,157 units in the 12 months to September of 2017 .

Comparing net absorption in 2016 to 2017, we see that the rate at which new apartments have been leased have increased from 2016 to 2017. We also see that deliveries, the construction of new apartments, fell from 2016 to 2017, indicating a tightening of apartment supply and thus a boost to increases in rents.

Located in the University submarkets, the St. Moritz property has benefitted from positive rental increases in 2017. Average rent increased by 2.8% in the third quarter of 2017, bringing average rent in Tampa to $1,154. Exhibit 14 shows the rental submarket breakdown for the Tampa Metropolitan area.
Exhibit 14: Tampa Submarket Rental Breakdown in 3Q 2017

CBRE categorizes Tampa as a Tier III market for multifamily housing. Exhibit 15 below shows the cap rates for the first half of 2017 for both stabilized and value-add properties by classes “A”, “B”, “C” across Tier I, Tier II, and Tier III cities in the United States.
A cap rate refers to the percentage of net operating income represented by the purchase price of the apartment complex. In this way, one can think of the cap rate as the return an investor can expect to receive on a given apartment complex or the amount of money an investor can expect to receive as a proportion of the apartment complex’s purchase price.

Class B stabilized cap rates are at 5.50%-6.00%, while value add cap rates are 6.00%-6.50%. Class C stabilized cap rates are at 6.50%-7.00%, with value add are floating around 7.00%-7.50% . Tampa’s cap rates are favorable compared to other metropolitan areas, especially Tier I assets, which have cap rates between 4.00% – 4.50% for stabilized class B assets and 4.00% to 4.75% for class B value add assets . The lower cap rates seen in Tier l markets are due to the overbought nature of these markets. As a result, we are drawn to the yield opportunities in the Tier II and Tier III markets.


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