Steady (& Silver): Tampa’s 2020 Growth Patterns
The city is poised for a prolonged economic expansion.
As 2019 ended, several Florida cities hit the headlines for incredibly low unemployment. Tampa, Florida, was near the top of the list. With a 2.2% increase in jobs and just 2.7% unemployment, the city sometimes called “The Big Guava” is poised for a prolonged economic expansion in 2020 and 2021.
This is good news for real estate investors in all sectors of the industry. The area is rife with expansion, development and a strong demand for both new and existing housing.
“Not only does the Greater Tampa Bay area have a population of nearly 3.1 million, but around a third of those people are renters,” observed Jonathan Waysman, a managing partner at Tampa-based Momentum Group. The boutique investment firm specializes in turnkey real estate investments, off-market discounted properties and real estate investment services in the Greater Tampa Bay market.
“When you combine our seven-year population growth of 10.85% (105% faster than the national average) with our job growth, which is about 18% faster than the national average, we believe you have an extremely strong, sustainable market for rentals going into the New Year,” Waysman said.
Thanks to its prime location in Florida, which has had one of the lowest tax burdens in the country for decades, Tampa is particularly attractive to some of the most influential populations in today’s housing market: young professionals and baby boomers. The former move to Tampa to take advantage of relatively affordable housing options and the expanding local economy, while the latter view the area as a prime location in which to spend their retirement.
“Tampa is one of the most affordable, large markets in the country right now,” said Dennis Cisterna, CEO of Guardian Residential, a single-family residential investment fund, and CIO of Lafayette Communities, another SFR investment platform focused exclusively on build-to-rent opportunities. “We implement several different strategies within the Tampa market right now. We buy build-to-rent communities of either single-family homes or townhomes, then operate them the same way you would an apartment community. Tampa fits the bill for us because it is still a relatively affordable market, has strong rental demand and has showed good employment growth.”
Adriana Pop, senior associate editor at Yardi Matrix and author of the data firm’s fall 2019 Tampa market report, agreed. “Multifamily demand continues strong in Tampa, boosted by above-trend population and employment gains,” she wrote in third quarter 2019. Pop cited the area’s 20,000 “high-skill, high-wage STEM positions” for much of the market’s stability and ongoing expansion. Those positions accounted for roughly a third of all job openings in Tampa over the past year.
Plenty of Investment Potential Remains
Although investor activity has been strong in the Tampa area and there have been local concerns about housing affordability in 2020, new development trends in the area support continued economic expansion and associated population growth.
Pop cited “a combination of below-average rents and steady economic growth” for “luring investors to Tampa,” but predicted housing demand and the inventory intended to meet it would continue to grow in the New Year.
“Multifamily sales reached $2.9 billion in the first 10 months of 2019, surpassing last year’s cycle peak of $2.6 billion. Developers have also been active, delivering 5,000 units, while another 7,900 are under construction,” she said.
Waysman cited the I4 corridor in Polk County as another area where investors can still gain a foothold in Tampa’s ongoing growth (see sidebar below).
“Polk County and the Lakeland-Winter Haven area, both located in the vast space between Tampa Bay and Orlando, are becoming more and more appealing to new businesses, large companies and new residents,” he said. “Big companies are taking advantage of the quickly merging areas that seem to be on track to become one massive metropolis.”
The Lakeland-Winter Haven area’s population rose by more than 4% in 2018 and appears on track to repeat that growth in 2019, according to Momentum Group data.
“Polk County itself has seen a 10.6% growth in population since the last census, compared to 4.7% nationwide and 9.6% statewide,” Waysman said. “The I4 corridor benefits from proximity to Orlando without the costs that inevitably come with being located directly in that city and, of course, from proximity to the opportunities in Tampa.”
For investors interested in short-term rentals, Tampa offers plenty of opportunity as well. Mashvisor’s Heba Baker noted that Tampa represents the ideal market for investors considering Airbnb and other short-term rental platforms because of the attractive climate, relative affordability, strong rental market and lack of short-term rental regulations so far.
“Florida has banned local governments and municipalities from passing laws that prohibit short-term rentals, [and] so far, there have been no city-level or county-level ordinances passed,” Baker said.
Thanks to state-level licensing requirements and an agreement between Airbnb and Hillsborough County that leverages tourist taxes to support the local economy, Hillsborough, for which Tampa is the county seat, brought in more than $673 million in tourist development revenue in 2018. When the final 2019 numbers are in, last year appears likely to easily surpass 2018’s milestones, and that revenue contributes to Tampa’s presence on multiple “best places to buy a vacation home” lists.
Emerging Issues with Housing Affordability
Not surprisingly, Tampa’s economic growth and associated population expansion are creating some potential housing affordability issues for 2020 and beyond. However, Waysman said, unlike most cities of its size, Tampa has room to grow and its population can rent or buy in desirable locations.
The National Association of Realtors (NAR) agreed, pegging the Tampa market as one of 10 U.S. housing markets it expects to “outperform over the next three to five years” thanks to domestic migration, housing affordability for new residents, consistent job growth compared to the national average, population, age, attractiveness for retirees and home-price appreciation.
Marco Santarelli, founder and president of Norada Real Estate Investments, noted that the sale-to-list price ratio in Tampa hovered just over 98% in 2019, with median list prices in the area trending as high as $277,000 midyear.
“There is still a tremendous amount of demand for entry-level single-family homes in Tampa,” he said. When would-be homebuyers are unable to make a purchase, they opt to rent rather than leave the area.
“Tampa has a very strong tenant pool thanks to lots of renters looking in all price ranges,” said Lori Hendrix, director of property management at Tampa-based Dennis Property Management. “Depending on the area of Tampa, you can rent a three-bedroom, two-bath home for as little as $1,350. Our pricing still is reasonable and has good range.”
Hendrix added that investors also experience the benefits of local housing affordability even though the margins may be tightening in the coming months.
“You can still buy homes for less than $135,000 under the right conditions,” she said, “and Florida investors also enjoy plentiful tax benefits when they invest in rental properties.”
Hendrix said many clients with Dennis Realty and Dennis Property Management own multiple properties they pay off and cash flow as part of their retirement strategy. “It is a good way to make steady money without dipping into your retirement savings,” she said.
Waysman predicted that as housing affordability becomes more of an issue in the Tampa area, it will be increasingly important to find ways to minimize rehab and maintenance costs when acquiring new properties.
“We designed Momentum Group with those types of bulk-related savings in mind,” he said. “We handle everything in-house, from acquisition and construction to renovation and maintenance, to keep our costs as low as possible. As median home prices in our area rise, we expect that to serve us well.”
Median sales prices remained consistent and, in some cases, rose even higher in the area during the latter half of 2019, putting single-family home values up between 5% and 14% in the counties around the metro area.
“We are currently in a sellers’ market and are likely to stay there in 2020,” Waysman said. “We currently have less than three months’ housing inventory, and about five months’ worth is considered a healthy balance.”
Booming (and Busting) with the Silver Tsunami
Another factor currently driving demand in certain sectors of the Tampa market is the onslaught of baby boomers moving to and already living in the area. At present, baby boomers own around a third of all Tampa homes. As that population ages in place or in active and senior living facilities, it will continue to affect the local economy and local housing demand.
Right now, those residents are tying up a great deal of the local housing inventory. That could change dramatically over the next 10-20 years as those retirees downsize or die.
Zillow analysts warn the Tampa-St. Petersburg-Clearwater metropolitan area in Florida will face “the biggest impact” from this ripple effect as the Silver Tsunami “releases 33.2% of all homes in that area into the market.” Pasco County, on the north side of the metro area, could see a 43.4% housing turnover.
The analysts said changing views on retirement could result in a surplus of housing in Tampa and other popular retirement destinations over the next 30 years. “If the number of future retirees choosing to make these places home during their golden years fails to match generations past and local housing demand fades, these areas may end up with excess housing,” they predicted.
Further, “Well-known retirement destinations, including Miami, Orlando, Tampa and Tucson, will experience the most housing turnover in the wake of the Silver Tsunami.”
In Tampa, specifically, this potential turnover represents a window of opportunity for investors already watching market trends and buyer preferences in the area. With a growing population of young professionals in lucrative STEM careers and placement on lists like the Computing Technology Industry Association (CompTIA)’s “Top 20 Tech Towns,” the key to riding out the next effect of the Silver Tsunami will be investors’ ability to modernize and upgrade these newly “released” properties to appeal to the next generation of homeowners.
With 150 tech startups and plenty of major corporations calling the Tampa Bay area home in 2019 and plenty more poised to follow in 2020 and 2021, there is unlikely to be a dearth of motivated buyers and renters eager to live in the area. Tampa Bay area tech jobs alone boast median salaries of nearly $80,000 a year. CompTIA projects IT employment in the area will grow 6% by 2024. CBRE Group Inc. also placed Tampa Bay in its “Top 50 Areas for Tech Talent” in 2019. According to PayScale, Tampa’s median salary across employment sectors in 2019 exceeded $63,000.
“Tampa’s market has organic demand, resilient product and a diversified economy,” Cisterna concluded. “Nothing is bulletproof, but Tampa’s long-term prospects are very strong.”
Tampa, Florida: By the Numbers
2.5
Months supply of housing inventory as of September 2019 (Greater Tampa Realtors Association)
6.7%
Increase in median sales price, year-over-year, as of September 2019 (GTRA)
35.6%
Of the Tampa Bay area population are currently renting
8th
Tampa’s place on HotPads’ list of most popular rental markets for 2019
61%
Tampa’s six-year equity growth rate. The national average is 41% over the same time period (Momentum Group)
1st
Tampa’s place on Hire a Helper’s list of cities people are moving to in Florida in 2019
20,000
Number of STEM jobs added in the Tampa metro area as of September 2019 (Yardi Matrix)
60,000
Total number of jobs added between January and September 2019 in the Tampa metro area (Yardi Matrix)
2.9%
Rent growth in Tampa year-over-year as of October 2019 (Yardi Matrix)
Sidebar: Intense Growth on the I4 Corridor
Florida’s Interstate 4 (I4) consists of 132 miles connecting the cities of Tampa and Orlando. It is home to more than 8 million residents and boasts more than 60 million visitors each year, making this area in central Florida the state’s fastest-growing region. In fact, according to U.S. Census data, I4 corridor growth outpaces south Florida 2 to 1.
Interestingly, the I4 corridor is also often anecdotally referred to as the 132 miles “where presidents get picked” thanks to a heavy swing vote in the area that makes it one of the most fought-over political battlegrounds in the country. Consultants for both parties refer to it as “a corridor of power” and compare winning the Tampa Bay area to winning the entire state of Arizona. Forty-three percent of Florida’s voters reside on this corridor, and the concentration of middle-class and affluent residents will likely rise in the coming decade as more and more jobs move into the area.
With the advent of the Florida Department of Transportation (FDOT)’s “I4 Ultimate” and “Beyond I4 Ultimate” projects, investors and economists may expect tourist traffic to rise. The projects involve widening the corridor; reconstructing and widening multiple bridges and overpasses; installing a rail corridor along parts of the highway; and adding sidewalks, bike lanes and hiking trails alongside the road in both directions. Assuming the corridor can handle this new volume, the remaining undeveloped area along the corridor is likely to go for a premium while existing inventory values rise as well.
“With the growth of businesses in the I4 corridor comes the increase of available jobs and people migrating to the area,” said Momentum Group co-founder Jonathan Waysman. “The I4 corridor is quickly becoming more and more appealing to new businesses, large companies and people.”
In 2019, the I4 corridor and Polk County, considered “the heart” of I4, announced more than $450 million in new capital investment in the area and 2,400 new jobs in Polk alone. The corporate headquarters for Publix Super Markets is already located in the area, and Nucor Steel, Amazon Air and Molekule, a science and technology company specializing in air purification, all plan to break ground or open in 2020.
Waysman noted Polk County is an ideal location in which to own rental property and is likely to remain so.
“Since 2013, the renting population has grown from 29.5% to 32.2%,” he said. “This rise is consistent and similar to the Tampa Bay area.”
