Tampa Bay: Will the Good Times Keep Rolling?

Tampa Bay

With all the talk about a looming recession — inverted yield curves, slowing factory orders and so on — it’s easy to believe that everybody’s next residence is going to be a highway underpass. But if you’re looking for a real-world indicator of continued economic expansion — and thus a continued real estate boom — look no further than Tampa Bay.

The Gulf Coast of Florida –in fact the entire state — is the canary in the economic coal mine. As early as 2006, unemployment was creeping up in Tampa Bay and by 2007 housing starts all but evaporated. The region was swamped with foreclosures and houses were cheap enough to put on your credit card a year before the rest of the country knew it was in the Great Recession.

But that’s not happening now. Far from it.

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Housing Starts … and Doesn’t Stop

Between Tampa, St. Petersburg, Clearwater and the surrounding Census-designated places, there are more than 3.1 million residents, and the demographics are a little surprising.

We tend to think of this area having a huge Cuban influence, but it turns out not to be the case. Certainly, there is a strong Cuban-American community in the area and in the city of Tampa in particular, but there are more families from either Puerto Rico or Mexico. Taken altogether, though, Latinos make up only 11% of the region’s population, just a fraction more than the African-American population. Tampa Bay is a predominantly Caucasian region, but even that apparent lack of diversity is not what it seems. When you think of white Southerners, you might just assume that they’re mainly Republicans and evangelical Christians, but that also turns out not to be the case. The area is roughly split between Republicans and Democrats and, although those who express a religious preference tend to be evangelical, they are far outnumbered by those who decline religious affiliation.

What we do know for a fact about the Tampa Bay population is that it has far more people moving in than it has people moving out. According to City-Data.com, for every two moving vans pulling out of Hillsborough County, three others are pulling in. “Multifamily transaction volume exceeded $2.5 billion in 2018, marking a new cycle peak, as investors are drawn by the region’s solid fundamentals,” according to a recent Yardi Matrix report. “Developers completed 5,187 units in 2018, with an additional 3,660 units expected to come online this year.”

As is the case through much of Florida, tourism has an outsized effect on the local economy. This sector added 5,600 new Tampa Bay jobs, but these are often seasonal, temporary, part-time or just plain dead-end. It’s been said that, to Floridians, the word “ambitious” means working four bartending shifts a week.

In the realm of rental property development, though, this is not bad news. Sure, the churn is high, but that just means that residents have to rent instead of buy, and there is a premium to be had.

“Rents in the working-class Renter-by-Necessity segment rose 4.6% …, while Lifestyle rates were up 2.6%,” Yardi Matrix continues. “Rents have grown rapidly for years due to a combination of below-average rates and above-average economic growth, and that could extend well into the future.”

The new Neighbors

You wouldn’t think of Tampa Bay as a destination for Millennials, and it doesn’t fit the profile. In other posts in this space, you’ll read about the big companies that have headquarters or regional offices in a particular urban area. The biggest corporation based in Tampa is The Mosaic Company. Yes, it sounds high-tech to those of us old enough to use the Mosaic web browser in the mid-1990s, but this Mosaic isn’t that. It mines phosphates and potash to make fertilizer. And that does require a certain amount of technical and creative brainpower, but hardly enough to pack the local Starbucks.

And, while the region’s unemployment rate is slowly notching up, it’s still below 4% while employment — which is measured differently — is also increasing. Even so, the mix of occupations available doesn’t exactly scream for Ph.D.’s in data science. There are indeed computer jobs in Tampa Bay, but not more than the restaurant, retail or customer service jobs. Far more jobs are to be had by landscaping and cleaning crews.

The area, however, is home to the three main campuses of the University of South Florida. USF doesn’t jump out at you as a bastion of technological erudition the way MIT or Stanford or CalTech does, but it’s not that far behind. It’s in the Top 10 among universities worldwide in the number of U.S. patents granted and in the Top 50 among all American universities in terms of research spending. That $1.5 billion lab budget is bound to attract more than a token few of the best and brightest.

And some of them will be entrepreneurs who’d rather form their own startup than wear a corporate ID badge. The biggest success story out of Tampa’s tech community is that it lured WebstaurantStore’s headquarters away from Pennsylvania. By the way, Mosaic wasn’t born in Florida either — Tampa bay poached it from Minnesota. Don’t be surprised if other rustbelt companies follow the sun down to Florida’s Gulf Coast — and bring management, marketing, research and creative jobs with them. It already seems to be happening, as professional and business services comprise the fastest-growing job segments, albeit from a low baseline.

Already, there’s a clear distinction between Tampa Bay’s youthfulness and the prevailing demographic that has earned Florida the nickname “God’s Waiting Room”. The average resident in the metro area is six years younger than the average Floridian. There is just as great a distinction when it comes to academic attainment; locals are far more likely to have a college or graduate degree than others in the Sunshine State.

So Millennials are, coming to Tampa Bay but, candidly, not yet in droves. They have formed several young-professional enclaves which the next wave of arrivals might find attractive.

Youth, but no Fountain

Here’s the true story of Juan Ponce de Leon. He was a Spanish nobleman who chose a life of adventure and served under Christopher Columbus under the famed explorer’s second voyage. Starting in 1508, Ponce de Leon served as Puerto Rico’s first governor, establishing the tradition of corruption and over-the-top drama that persists to this day. But the Columbus family, which resented how much money Ponce de Leon was able to make off this new continent compared to their own more humble fortune, kicked him off the island. He shrugged it off and set sail again. After all, he had a whole new world to explore.

He continued his journey, making landfall in 1513 in a place he named La Florida, where he sought gold and plantation land. His explorations took him very likely from St. Augustine, down around the Keys and up the Gulf Coast perhaps as far as Pensacola. In 1521 he picked a fight with a local tribe known as the Calusa and was killed by a poison-tipped arrow.

Everything else you’ve likely heard about Ponce de Leon is probably garbage. All that stuff about searching for the fountain of youth is not to be found in his expedition’s charter or ship’s logs. It was first recorded more than a decade after Ponce de Leon died and mainly forgotten until somebody decided to fabricate a tourist trap in St. Augustine.

Besides, even the most casual visitor to the Sunshine State knows that, if there is a fountain of youth anywhere in the world, it’s nowhere in Florida. That’s not to say there is no youth there. There are bastions of recent graduates throughout Florida, and around Tampa Bay particularly. But there’s no fountain. The supply of youth needs to be constantly replenished by new transplants.

Upon consulting an array of sources, it appears that these are the most Millennial-friendly neighborhoods in the region:

  • Downtown Tampa and the adjacent Channel District, a.k.a. Channelside, are part of Tampa’s urban core, sandwiched between the more established neighborhoods — Hyde Park to the west and Ybor City to the east. These neighborhoods are pricey by local standards, whether for high-rises in Downtown or loft apartments in Channelside, but are close to nightlife and such attractions as the Florida Aquarium. 
  • Courier City/Oscawana, on the other side of Hyde Park from Downtown, features Howard Avenue, which is packed thick with bars and restaurants.
  • Carver City/Lincoln Gardens, in the west end of Tampa, is convenient to — but not on — the beach, and is convenient to Tampa International Airport and Raymond James Stadium, or what Buccaneers fans call “Ray Jay”.
  • Historic Ybor, adjacent to Channelside, is considered one of the trendiest neighborhoods in Tampa. It is not to be confused with the three other neighborhoods with “Ybor” in the name.
  • Hunter’s Green, a community in the New Tampa area northwest of the urban core, presents a more affordable alternative. It caters to people who want to get in a round of tennis or a few laps in the pool after work.
  • Downtown St. Petersburg is just as viable an option as any neighborhood in the more urbane city to the east. It’s right on the beach, has a major arts vibe and is a short jaunt to Tropicana Field for a Rays game. More than 1,200 units are currently under construction there.

All That and More

Of course, these aren’t the only neighborhoods around Tampa Bay that are attracting new residents.

Gandy and Ballast Point are often considered in tandem, despite being separated by a bridge spanning three miles of bay water. Gandy is part of St. Pete and Ballast Point is part of Tampa. Taken together, though, rents rose 7.7% year-over-year, according to Yardi Matrix, the sharpest increase around Tampa Bay. This tends to explain why these two communities also have more units currently under construction than any other submarket.

The Gulfside communities of Palm Harbor and Tarpon Springs, meanwhile, saw 7.5% year-over-year rent rises, despite being tucked away in the northwest corner of the metro area.

The good times for Tampa Bay’s multifamily real estate market won’t last forever, but there doesn’t appear to be any imminent cause for concern.

Tampa Bay at a Glance

  • Construction (projected, 2019): 3,660 units, down from 5,187 in 2018; 7,200 units were under construction in March 2019 with another 37,133 in planning or permitting
  • Occupancy rate (March 2019): 94.9%, down 40 basis points year-over-year
  • Annual rent (March 2019): $1,239, up 3.6% year-over-year with 3.3% growth projected through year-end 2019

Sources: Yardi Matrix

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Tampa Bay: Will the Good Times Keep Rolling?
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Tampa Bay: Will the Good Times Keep Rolling?
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The good times for Tampa Bay’s multifamily real estate market won’t last forever, but there doesn’t appear to be any imminent cause for concern.
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Sharestates
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