Southwest Florida Multifamily Markets Hit Decade-High Vacancy Rates
Rebound in Renter Demand Unable To Keep Pace With New Completions
Southwest Florida is in the midst of a significant supply wave, which is impacting multifamily vacancies across the region.
Sarasota and Fort Myers are the largest multifamily markets in Southwest Florida, with 43,500 and 33,000 units, respectively. Both markets have faced substantial supply waves, with thousands of units coming online over the past few years. Renter demand has been well below the rate of completions, causing the vacancy rate in both markets to rise to new highs.
Sarasota closed the second quarter of 2024 with a 13.3% vacancy rate, the highest it has been in over 25 years. In comparison, the last peak was still under 12% in 2007. In addition, the market had a supply wave in 2019, but the vacancy rate topped out at around 10.5% in 2020. Renter demand was driven by solid rates of in-migration in 2020 and 2021, prompting developers to break ground on thousands of units.
The vacancy rate hit an all-time low of 3% in Sarasota in the final quarter of 2021, but fundamentals have eroded since then. State-to-state migration patterns have returned to pre-pandemic norms, and Sarasota and Manatee counties have fallen out of the top 10 counties in Florida for population growth.
The second quarter of 2024 was a record for completions for the Sarasota market, with just under 2,000 units. It was also the best quarter in terms of absorption, tenant move-ins versus move-outs, in three years with 785 units. The first half of this year was a significant improvement over the same period in 2023, with over 1,200 units absorbed in the first half of this year compared to less than 350 units in the first half of 2023.
The supply pipeline has remained elevated in Sarasota, with roughly 4,900 units under construction. The continued supply-side pressure will likely keep the vacancy rate elevated in the double digits over the next few years.
Fort Myers is facing similar challenges, and its vacancy rate has risen by nearly 500 basis points from this time last year to 14.7%. This is not the first time recently that Fort Myers has weathered a supply wave; between 2019 and 2021, over 8,000 units were completed, and the vacancy rate peaked at around 16% in 2020 before quickly falling to 6% by mid-2022.
However, much of that was fueled by an increased influx of new residents. As with Sarasota, migration patterns in Fort Myers have returned to pre-pandemic norms, and landlords should not expect similar levels of renter demand over the next few years.
New supply has outpaced renter demand in Fort Myers for 2 consecutive years, and that trend has carried over into 2024. While 900 units were absorbed in the first half of the year, over 1,800 units were completed.
Additional supply-side pressure is on the horizon for the Fort Myers market as the pipeline of 7,400 units is set to be completed over the next few years. Vacancy will likely peak by mid-2026 as expected renter demand will continue to remain below the rate of new completions.
(CoStar Analytics | By Michelle Rumore)
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