Robust Demand in Tampa Fuels Quarterly Decline in Multifamily Vacancy, Continued Rent Growth

The Tampa multifamily market has shown strength in the face of strong supply growth since the beginning of 2024, with most major metrics improving during the opening months of the year. Inventory growth accelerated from the fourth quarter to the first quarter as Hurricane Milton delayed several projects that were slated to come online late last year. Projects totaling approximately 3,100 units came online during the first quarter. The slowdown in the closing months of last year led to slight vacancy improvements which carried over into early 2025. Area vacancy posted a combined vacancy decline of 30 basis points in the fourth quarter of 2024 and first quarter of 2025, after the rate spiked in the middle part of last year. Renter demand has supported recent vacancy tightening. Net absorption totaled nearly 5,700 units in the 12-month period ending in the first quarter, up 29% from the average annual absorption from 2020 to 2024. Elevated absorption has supported rent increases, with average asking rents ticking higher since early 2024.

Sales activity in the Tampa multifamily investment market remained limited at the start of this year, mirroring trends that have occurred at the start of both 2023 and 2024. Transaction volume was distributed across the region, with North Tampa continuing to lead in the number of properties changing hands. The market is adjusting to new pricing dynamics. From 2021 to 2024, per-unit prices surged, with the median price ranging between $210,000 per unit to $240,000 per unit. During the first quarter, that figure dipped to $187,000 per unit, a drop that was fueled in part by sales involving older vintages. During the first quarter, 1970s- and 1980s-vintage properties accounted for approximately half of total sales. This is in contrast to last year, where newer assets selling at elevated per-unit prices accounted for the greatest share of transactions.

Looking ahead

Changes in operating conditions in the Tampa multifamily market are expected to shift in a more favorable direction in 2025, as vacancy increases should be mild and rents are projected to continue advancing at a healthy pace. Still, supply growth and the cumulative impact of last year’s inventory additions will continue to impact the market. While total completions in 2025 are forecast to lag 2024 levels by more than 25%, supply-side pressures will persist for at least a few more quarters. Area vacancy is projected to rise 50 basis points for the full year, following a larger increase in 2024. Operational performance will remain varied across submarkets, though some areas such as Pasco County are primed to outperform. Pasco County has recorded the strongest absorption of any submarket in the region, making it one of the few areas within the Tampa area to post tightening vacancy and positive rent growth.

As property performance stabilizes, more investors should begin to come off the sidelines and become active in the market. While cap rates remain in line with last year’s levels, they are up from 2023 and may rise again throughout 2025 particularly if the mix of transactions shifts towards older, lower-tier properties. Any increase in cap rates should boost investor interest by aligning buyer and seller expectations, and making acquisitions easier to finance despite elevated interest rates. Any increase in the number of Class A properties that change hands would likely offset the trend of rising cap rates, though top-tier transaction volumes are unlikely to reach last year’s elevated levels. North Tampa is projected to remain the region’s most active submarket, though the Central Pinellas submarket is also poised to have a heightened level of activity this year.

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