Central Florida Construction Outlook for 2024

by | Dec 29, 2023 | News | 0 comments

FLORIDA MAINTAINS STEADY GROWTH RATE DESPITE NATIONAL ECONOMIC CHALLENGES

Looking back at the construction landscape in Central Florida throughout 2023, it’s clear that the industry has encountered a diverse set of challenges and opportunities as it prepares to usher in the new year. However, amidst this dynamic environment, there is a silver lining of positivity and resilience that underscores the sector’s ability to navigate and thrive in the face of these diverse circumstances.

Looking ahead, 2024 presents an intriguing landscape for development in Central Florida. The residual impacts of the 2020-2023 inflationary period persist, posing financial challenges for development deals amid high-interest rates and projected rental rates. While the supply chain issues presented in recent years past are resolved, the pace of inflation has been steadied to normal historical rates. However, subcontractors across the region are still relatively busy with ongoing projects, so construction pricing has yet to decrease. Developers are cautiously approaching 2024, with some adopting a “Survive Until ’25” mindset, anticipating limited new construction starts.

Image from an active FINFROCK job site for a parking garage

Active project site for Deseo Grande, a FINFROCK parking garage near International Drive in Orlando, FL.

All the while, Florida’s construction industry experienced its fifth consecutive month of growth in October 2023 with 2,500 jobs added since September 2023. New construction permitting also continues to trend upward in Florida, demonstrating Florida’s unique level of economic health. Florida also continues to lead the nation in new business formations, with 2.7 million new businesses since 2019.

Amid the struggle to advance new deals, heightened competition in the market is evident. Despite the challenges, as of December 2023, there is a notable abundance of development opportunities in the construction sector. The key lies in identifying financeable projects for developers to take a chance on.

Hotel/Hospitality

The hotel and hospitality markets, especially new construction starts, experienced a slowdown since COVID, with the exception of a few large resort-style projects. Financing challenges, attributed to construction cost inflation and prevailing interest rates, have made hospitality projects increasingly difficult.

However, with occupancy returning to pre-pandemic levels, development activity is expected to persist in Florida once cost, interest rates, and room rates align favorably.

Universal’s Endless Summer Resort by FINFROCK

Multifamily/

Condominiums

Multifamily, once a thriving market, has slowed due to unacceptable yields from an investment perspective. Despite this, demand for housing, including multifamily, is projected to rebound in the coming year, contingent on the labor market’s stability. Florida’s strong performance in 2023 is attributed to historically low vacancy rates and robust household income growth.
Rendering of Centerpointe apartments

Rendered image of CenterPointe apartments, an active multifamily project by FINFROCK located in Altamonte, FL.
Florida’s key industrial markets are thriving due to a scarcity of well-located developable industrial land, healthy lease absorption, rent growth statistics, and a consistent influx of new residents to the state. In central Florida, despite economic challenges, tenant demand remains robust. This demand is expected to drive an increase in rental rates.

Developers, however, may cite the need for a cooling-off period to absorb the influx of units delivered in the past year. While rental rates in Florida’s urban cores remain robust, struggles to keep pace with inflation and increasing interest rates have directed developers towards lower-density options in markets outside of the region. With the need for housing, this sector has slowed down but will continue gradual growth.

Student Housing

FAMU Towers

FAMU Student Housing by FINFROCK

Florida’s influx of new residents has fueled the state’s economy and contributed to its overall growth and prosperity. Student housing facilities, which serve as vibrant communities for academic pursuits and personal growth, are operating at an impressive current on-campus occupancy rate of 94% or higher.

This surge in demand reflects not only the allure of Florida’s academic institutions but also the state’s broader appeal as a desirable place to live and study. Growth varies by institution, but if schools can expand their footprint, this market will likely continue to expand, albeit slowly.

Office Buildings

The Orlando Metropolitan Statistical Area (MSA) has experienced positive economic indicators in the third and fourth quarters of this year. The labor force continued to increase, keeping unemployment rates steady. Key sectors such as financial services have contributed to job growth. This sector added over 3,100 jobs to the region in the past year, further enhancing the economy. However, the office market has seen a slowdown, influenced by work-from-home trends adopted by some companies, reducing demand for office space. Build-to-suit office projects are underway, but the spec-built office market may take a considerable amount of time to regain momentum, if ever.

Wide shot of City Center parking garage and office building

City Center at O-Town West: A mixed-use project from FINFROCK and Unicorp

Retail

In Florida, the retail sector has rebounded from the pandemic, driven by record population growth and restored consumer demand. In fact, retail is the nation’s largest private sector employer driving the U.S. economy and creating jobs in the communities around the country. Central Florida’s retail market remains vibrant and resilient, demonstrating its strength despite a slight deceleration in leasing activity. The market continues to maintain historically low vacancy rates, highlighting its stability and attractiveness to retailers.

Parking Structures

The parking structure market, which experienced a slowdown in 2022, has seen renewed opportunities in 2023 and is expected to continue into 2024. Mixed-use garages, integrating with surrounding structures, are a growing trend, reflecting the evolving needs of urban development.

Photo collage of 4 FINFROCK parking garage projects

As the commercial construction industry continues to expand in Florida, parking opportunities remain prevalent across various sectors. Despite developers’ inclination to minimize the need for parking structures, they remain integral to urban development, particularly in a state experiencing consistent population growth. The outlook for demand for FINFROCK’s parking structures remains robust as the retail, multifamily, hotel, and office markets sustain healthy growth.

Select market research provided on behalf of FINFROCK’s Vice President of Project Development, Dan Helmick, PE.