Summary:
Hurricane Milton made landfall on October 9 near Sarasota, causing heavy rainfall and flooding across Tampa Bay, particularly in Pinellas and Hillsborough Counties. This followed the devastation from Hurricane Helene, which brought significant storm surges less than two weeks earlier. The multifamily housing sector appears to be the most affected, with numerous properties experiencing flood damage, particularly on first floors. Construction delays are expected, and short-term spikes in leasing may occur as displaced residents seek temporary housing. However, these gains could be temporary, similar to trends observed after Hurricane Ian in 2022.
Full Article, CoStar Analytics
Hurricane Milton made landfall around 9 p.m. on Oct. 9 near Siesta Key, just outside of Sarasota and roughly 70 miles south of Tampa. While the region was mostly unscathed from the storm surge, a historic amount of rain caused flooding across Tampa Bay. All this came less than two weeks after Hurricane Helene devastated areas along the Gulf of Mexico and Tampa Bay with upwards of eight feet of storm surge.
The full extent of the damage from both Hurricane Helene and Milton has yet to be determined. Still, it already appears that the multifamily sector will be the most impacted commercial property type. Areas in Pinellas and Hillsborough Counties received over a foot of rain from Hurricane Milton, causing significant flooding in non-evacuation zones. For context, the typical amount of rain for the entire month of October is just over two inches.
Days later, water levels were still rising from overflowing rivers, causing water lines to burst and overwhelming city and county water pumping stations.
There are reports of several multifamily properties across the Tampa Bay region that had their first-floor units flooded out. Images of water rescues being performed in apartment complexes were a staple of national and local news coverage.
CoStar is still researching how many units have been impacted, but it will likely be in the thousands. In addition, construction on some of the roughly 11,500 units in the pipeline may be delayed. For instance, one of the cranes for 400 Central, a 301-unit mixed-use tower in downtown St. Petersburg, was knocked over by winds into the neighboring 490 1st Ave. office building.
To a certain extent, the multifamily market may see a near-term acceleration in leasing as Helene and Milton damaged thousands of homes, some completely destroyed. The most recent storm to compare to was Hurricane Ian, which hit in late September 2022 in Fort Myers. In the fourth quarter of 2022, Fort Myers recorded over 580 units of absorption, compared to just 130 units in the quarter prior.
While not every move-in was Hurricane-damage related, there is a clear correlation. However, in the first two quarters of 2023, Fort Myers recorded roughly negative 450 units of absorption, negating much of the short-term occupancy gains recorded in the immediate aftermath of Hurricane Ian.
The Tampa Bay multifamily market is in the middle of a historic supply wave, which has pushed the vacancy rate to roughly 10% for much of this year. A period of prolonged elevated vacancy has caused landlords to ease asking rents, which are down 1% from this time last year. In addition, the vast majority of properties, especially those in lease-up, are offering concessions.
The region could see a pop in multifamily leasing activity, similar to what happened in Fort Myers two years ago. However, a portion of those newly occupied units will likely be short-term and have a low renewal probability as those tenants return to their homes after repairs are made.