Central Florida Market Updates
Leisure and Hospitality Employment in Orlando
Central Florida Update 2020
Orlando started off the year with a 2.9% unemployment rate. Once the pandemic hit the unemployment shot up to a high of 21% with over 200,000 jobs lost. The majority of this was in the Leisure and Hospitality sector which saw an unemployment high of 58% in May and preliminary numbers for July are at 30% unemployment.
Each month there are more people being hired back into the labor force. As of the end of July, there were 60,000 more people employed.
Overall, the industries that were hardest were hospitality and tourism. Between the main real estate asset classes in Orlando, apartments still seem to be doing well and industrial seems to be very strong.
Office and Retail are still having issues relating to lack of tourism and companies having their workforce work from home.
The Orlando Retail Market 2020
According to Costar, the retail market is still facing some headwinds and they forecast the next 3 quarters to be very challenging in Orlando with a significant amount of negative absorption and rising vacancies. Over time they are still bullish on the continuing trend of population growth and retail use expansion.
The office market seems to be focusing on struggling to deliver quite a bit of space and the change in need for space from us just in companies with employees working from home. CoStar is forecasting negative resorption over the next four quarters. However long-term they see the growth of about 350,000sqft per year by mid-2022.
They see the vacancy rate topping out at about 9% around the third quarter of 2021. According to Costar, the 4- & 5-star properties will get the hardest, with vacancies increasing closer to 11% while the 3-star properties should see fewer vacancies at around 8.5%.
Orlando Office Market 2020
The leasing activity has certainly slowed, with many large office using customers are looking to downsize space with their work for us working from home. However there does seem to be quite a few businesses not affected by the pandemic that are still looking for office space in the small to medium size.
Overall, the pandemic has been felt strongly in Central Florida. We can see the life starting to pick back up as more businesses are opening and dealing with the new reality. We strongly believe in the resiliency of the markets and the long-term growth and opportunities in Orlando.
Economy
The Central Florida economies have been experiencing sustained growth in both population and employment for the last several years. In early 2014, the region became the first in the state to regain all jobs lost during the recession.
Between Orlando and Tampa, the population in each metropolitan has grown by approximately 300,000 people over the last 5 years. Each area’s growth is forecasted to continue to increase between 300,000-400,000 over the next 5 years according to the Bureau of Labor Statistics.
Orlando has led the country with job growth from 2015 – 2018 at 4.8% as compared to the average in the U.S. of only 1.9%. Employment growth is expected to average at 2.0% well through 2023 according to Moody’s Analytics. Tampa has had the second-highest job growth in the State at 2.7%.
The current unemployment rate for both metros continues to outpace the State at between 2.7% and 3.3%.
The labor force in both metros continues to diversify. For Orlando, technology is now the second-largest industry. For Tampa, the second largest industry is financial services.
There are many infrastructure improvements underway, including the $2.3 billion I-4 Ultimate Improvement Project and Orlando International Airport’s recently-increased $4.27 billion capital improvement project.
Construction on the airport’s Intermodal Terminal Facility project which includes an Automated People Mover, the south terminal, and an additional 16 gates is well underway. This project is anticipated to be completed in 2020.
Additionally, the Central Florida Expressway Authority recently announced the largest plan in its history, which is expected to create over 11,000 jobs by 2022. The $1.6 billion work plan will widen existing roads, resurface and improve highway lighting and complete portions of the I-4 Ultimate.
In total, there are $7.2 billion of infrastructure projects currently underway.
The Office Market
The continued expansion of the Orlando population and a healthy job market have continued to drive office leasing opportunities.
Demand has greatly outstripped supply over recent years contributing to the very strong market fundamentals.
The metro’s significant population growth, which surpassed 2.5 million residents last year, has led to a flurry of medical office and healthcare construction. In contrast to many areas of the U.S. that are closing hospitals or searching for adaptive reuse, Central Florida’s medical growth and competition have continued to fuel medical tenant activity and job growth throughout the entire metro.
Orlando has also made strides as a burgeoning tech market and is one of the nation’s top STEM job growth metros. Thus far, the primary barrier for tech firms has been lack of space as compared to most major tech markets.
The Multi-Family Housing Market
With the increasing population and a robust job market, the demand for housing has continued to be robust.
This is perhaps most notable given Orlando remains in the midst of the largest supply wave in its history. With thousands of units underway across the metro, further upward pressure on the fundamentals is possible, though the metro has shown little difficulty thus far absorbing the increased supply.
The job growth is spread across several industries. Central Florida Research Park drives the bulk of this with over 10,000 jobs and nearly 125 companies. A close second is Tourism along the I-4 corridor, South of the Downtown metro.
The University of Central Florida (UCF) provides a steady stream of renters, particularly the Eastside, East, and South submarkets. As the second-largest university in the country by enrollment (more than 65,000), it houses only about 20% of its students, leaving plenty of renters looking for additional housing. The school’s growth outlook is also solid—UCF projects an annual increase of more than 2% in student enrollment through 2019, including an additional 8,000 students expected to enroll in the new downtown campus at UCF’s Creative Village.