July 25, 2024
By: Travis Watts, Director of Investor Development
Tourism Isn’t the Only Factor Driving the Orlando Real Estate Market
Orlando, Florida is often associated with its world-famous theme parks and vibrant tourism industry. However, this bustling city has much more to offer to multifamily investors.
While the leisure and hospitality sectors remain robust, the city is experiencing rapid growth in many other industries, including healthcare, aviation and defense, aerospace, financial services, and advanced manufacturing. These sectors have been contributing to the city’s economic health and provide diversified employment options for renters, that in turn, benefit apartment owners.
A Hub for Economic Expansion
Orlando’s unemployment rate currently stands at 2.9%, below the national average of 4.1%. The city is also projected to see an annual job growth rate of 1.1% over the next five years, nearly double the national average of 0.6%. Did you know Orlando is expected to add approximately 1,500 people per week for the next 11 years? By 2035, Orlando’s population is projected to reach about 5.2 million people, according to Oxford Economics.
In addition to the rapid expansion happening in Orlando, Florida in general, has seen significant growth in the number of companies calling the Sunshine State home. According to a recent Hire A Helper study, Florida saw an 86% net gain of corporations that moved their headquarters there in 2023, the highest net gain of any state. This rapid population increase places significant demand on multifamily housing as millions of Americans continue to be priced out of the single-family housing market and are relocating for job opportunities, warmer weather, and a tax-friendly environment.
Orlando’s Job Market Thrives on Industry Diversity
Healthcare and Research
Healthcare has been a leading employment sector for years in Florida. Since the onset of the pandemic, the healthcare sector has proven to be one of the most economically resilient among renters, benefiting apartment owners. Orlando is home to numerous hospitals, clinics, and specialized healthcare facilities, providing a wide range of services and high-paying employment opportunities for residents. The healthcare sector’s growth is expected to continue, fueled by the increasing demand for medical services (most notably retirees) and the presence of leading healthcare providers in the area.
Aviation and Defense
Orlando’s proximity to the Space Coast and robust infrastructure have created a hub for aviation and defense industries. The city hosts several major defense contractors and aerospace companies (i.e. Lockheed Martin and Boeing) offering even more white-collar jobs and economic diversity. Florida’s aerospace workforce is currently 41,800+ people strong with over 640 establishments in the sector.
Financial Services and Advanced Manufacturing
The financial services sector in Orlando is also on the rise, attracting banks, investment firms, and other financial institutions, many of which have relocated from New York over the past four years. Additionally, advanced manufacturing is on the rise, with companies specializing in high-tech production and innovation.
There are many other strong innovation hubs throughout the city. Right at the center is a new development, the Creative Village. Spanning 68 acres, Creative Village will be one of the largest transit-oriented developments in the Southeast and will build upon Orlando’s deep digital roots and success. NeoCity is another technology district that houses the world’s first industry-led smart sensor consortium, BRIDG. Plans are currently in the works for this hub to support a $15 million STEM-focused high school to drive future tech growth.
Navigating the Orlando Real Estate Market
Did you know Orlando ranked among the top markets nationwide for multi-family sales volume, with $1.7 billion in sales activity over the past year? New construction in Orlando has slowed significantly due to rising interest rates and inflation. The number of new permits issued for multi-family housing has dropped by approximately 45% compared to the peak in 2021/2022. This reduction in new supply anticipated to hit the market in the coming years, combined with the city’s growing population, creates a favorable investment environment for existing multi-family properties.
Investing in Orlando’s multi-family market in 2024 offers a unique opportunity to capitalize on the city’s outperforming strength and growth potential. Properties in desirable locations present attractive investment options as valuations are currently down from their peak of 2021/2022 due to rising interest rates. Particularly Orlando submarkets such as Horizon West are benefiting from proximity to major employers, top-rated schools, and high-paying employment options.
The Investment Opportunity
Our latest acquisition, Braxton Waterleigh, is located in Horizon West, one of the fastest-growing master-planned communities in the country. This Class A, luxury property was built in 2021 and consists of 354 units.
We are purchasing Braxton Waterleigh at a significant discount relative to recent sales comps. More notably, we are buying nearly 10% below replacement cost, providing an outstanding basis given that new construction completions in Orlando are projected to decrease by 57% in 2026 boosting demand for existing Class-A luxury apartments.
Business Plan and Projections
Our business plan for Braxton Waterleigh includes bringing discounted rents to the market level, further enhancing the amenities, and implementing our high-end luxury Halston brand finishes. The current owners reduced rents to compete with new construction lease-ups over the past three years. We are acquiring this property as lease-ups are nearing completion. As we enter the summer of 2024, surrounding properties, as well as Braxton, are nearing full occupancy, which has presented an opportunity to reduce concessions and lift the rents to the market level.
We are securing a fixed-rate agency loan at a competitive rate of 5.55% to mitigate risk for investors and we project a five-year hold period. Braxton Waterleigh is cash flow positive and offers investors significant equity upside potential as markets are projected to improve and demand is forecasted to rise.
Capitalize on the Orlando Real Estate Market in 2024
Orlando, Florida saw the 4th largest population gain in the country over the past year and is recognized by the Wall Street Journal as a “Hot Spot for Job Growth.” The current capital market conditions present a unique buying opportunity for investors this year, as discounted valuations are likely to be short-lived. With interest rates expected to decline in the coming years, valuations in the commercial real estate market are poised to rise. For those ready to invest, Orlando offers unparalleled potential and Braxton Waterleigh presents a unique opportunity to invest in a Class A trophy asset at a significant discount.
To learn more, we invite you to book a call with an Investor Relations representative. This complimentary, no-pressure call will equip you with the knowledge and information needed to make an informed decision. You can access additional information and review the investment overview by visiting www.investbraxton.com.
