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The multifamily market in Orlando, Florida, is preparing for a supply surge.

“Since 2018, the market has consistently grown in terms of how much construction is underway,” says Carl Whitaker, director of research and analysis at RealPage.

He says the market hit peak construction of about 25,000 units at the end of 2022, and it will be several quarters before the delivery pipeline starts to ease. He anticipates the second quarter of 2024 being the peak window in the market with about 16,000 units scheduled to deliver.

For now, Whitaker is optimistic about the market, pointing to the metro’s strong tourism sector as well as a more well-rounded economic base that is being built there that will help absorb some of the new construction.

In April, the Orlando area’s workforce was up 4.2% year over year, gaining the second-highest number of private-sector jobs for the month among all metro areas, according to data from the Florida Department of Economic Opportunity.

Whitaker adds that Orlando continues to get an extra boost of residents because of migration—both domestic and international.

“We think demand stays pretty strong. I don’t think it will match the past two years—that was a once-in-a-lifetime period,” Whitaker says, adding that the vacancy rate was 5.4% in May. “I think 2023 through the second half of the year and into 2024 will see more normalized demand levels. However, I do think you will see supply outpace absorption.”

The biggest concern regarding the market for Whitaker is if the nation hits a traditional recession. With so many jobs in tourism, Orlando has historically taken a hit during these periods as people stop traveling to the entertainment destinations and businesses pull back on expenses such as conferences.

In terms of rents, the market is still seeing some growth, but it has slowed precipitously. Year over year, according to RealPage, rent growth was right at 2% for May—one year earlier, the market had experienced 26% year-over-year growth. Month over month for May saw a 0.1% increase.

“I don’t know that Orlando will get into negative territory like Phoenix and Las Vegas, but I do think by year-end it will be in the 1% to 1.5% annual rent growth, which might be a little under typical expectations,” he says.

One market nearby to watch is Lakeland, which is halfway between Orlando and Tampa. Whitaker says he likes the bedroom community for the long haul since it’s benefiting from regional growth by being in the bull’s-eye of the Interstate 4 corridor and also a key distribution hub for big corporate retailers.

“The economy of Lakeland has a better chance of holding up in a recession because it’s not as tourism driven,” notes Whitaker.