Multifamily mania grips region (again)

For the second consecutive year, multifamily rental deals outpaced other commercial real estate classes in 2017, as investors sought to take advantage of macroeconomic trends and positive gains in population and employment throughout the region.

Ten of the top 15 transactions in the Tampa Bay area, Sarasota and Manatee counties and the tri-county region of Southwest Florida in 2017 involved apartments, as compared to just six of the largest 15 sales in 2016.

In the three submarkets combined, buyers spent $669.25 million to acquire properties such as the Echo Lake Apartments in Lakewood Ranch, the 35-story Element in downtown Tampa, and the Sienna at Vista Lake apartments in Fort Myers.

That total represented just more than half of the total $1.21 billion used to acquire the assets behind the largest five deals in each submarket in 2017, a figure that mirrored the collective total invested along the Gulf Coast in top transactions in 2016.

Apartment deals often make up the largest commercial real estate transactions because of the sheer size of the properties involved and their heightened income potential from rents versus other property types, such as suburban office, retail or industrial projects.

In Southwest Florida, a submarket composed of Charlotte, Lee and Collier counties, all five of the largest commercial sales of the past year — representing $326.56 million in all — involved multifamily rentals.

In Sarasota and Manatee, four of the top five sales — for a combined $230.35 million — were for apartments, fueled by job growth and population influx especially among more affluent baby boomers born between 1946 and 1964 and millennial renters aged 21 to 37.

Historic low interest rates, a trend away from home ownership in the U.S. — the percentage of homeowners now stands at its lowest level since the mid-1960s — together with renter willingness to dedicate a greater percentage of their take-home pay to housing than ever before also pushed sales of properties.

The Tampa area had but a single apartment deal in its Top 5, but it was the second-largest sale of the year in any asset class: The $112.4 million Northland Investment Corp. paid for the high-rise Element apartment tower.

Interestingly, total deal volume was essentially flat throughout the Gulf Coast and in the Tampa Bay area, where buyers invested $623.25 million in 2017 on the largest five commercial transactions — slightly more than half of the regionwide total.

In 2015, the total was $1.54 billion for the largest 15 commercial real estate sales, according to property records.

The Top 5 deals of 2017 brought in $266.85 million in Sarasota and Manatee counties, down 16% from the prior year, and $326.56 million in Southwest Florida, a gain of 13.5% from 2016's total.

As was the case in 2016, as well, a pair of high-profile sales of hospitality projects garnered considerable capital, the result of a lack of new inventory, sustained tourism gains and a positive outlook for future bookings.

The Don Cesar sale and the trade involving the Sirata Beach Resort together generated dollar volume of $322 million, far exceeding the $196.5 million the Hyatt Regency Clearwater Beach Resort & Spa and Hyatt Regency Sarasota raised in 2016.