Commercial Real Estate, Capital, Insurance, Leasing & Management

Economic Outlook: Tampa Bay’s economic resiliency may temper recession impact – Tampa Bay Business Journal

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Franklin Street Founder and Chairman Andrew Wright once again delivered an insightful presentation on the economic trends impacting commercial real estate at the Tampa Bay Business Journal’s Economic Outlook Event on Jan. 12. The event, held at Armature Works, attracted over 500 busines leaders from around Tampa Bay.

Below are excerpts from Wright’s presentation, compiled from by TBBJ Editor Alexis Muellner:


Some materials prices are going down. Anybody that’s building anything doesn’t feel that. It’s absolutely not the case. Maybe I can get lumber cheaper, but I can’t get an electrical panel. I can’t get roofing insulation, I can’t get skilled labor, I can’t find a mill worker. 

We are not experiencing anywhere near relief at this point in time, particularly in our markets. And layer on the operating uncertainty, some of this capitalization uncertainty in terms of how banks will feel when projects get completed, they’re not so confident that they’re going to have the robust growth that they’ve had for the last ten years. 

It’s making for a very challenging construction environment, so much so that I predict that projects will either be reduced, canceled or delayed.


It’s an interesting time. We’ve had record rate rental rate increases. 

The way you overcome negative leverage is through rent growth. And we’ve seen it. We’ve had some of the best rent growth across all product types in the country. But it’s a different world. With cap rates expanding, most likely debt being more restricted, and more capital required to be put into deals, I’m not as bullish on the performance of real estate as a whole, particularly the ones that had the lowest cap rates that were most sought after because the lowest cap rates will have the biggest impact in real estate value. 

You had record rent growth [here] leading the country in many ways. We would project that rent growth in multifamily will be at the lowest level since 2011. I don’t think it will go flat. Effective rents will be slightly up or flat, but asking rents will come down. Asking rents will be negative in 2023. 

Historically rents have been growing, vacancies have been tight, and the overall operating performance of apartments has been one of the strongest in the country. As a result, you had a lot of construction activity. That has been, for the most part, absorbed. And now you look at the pipeline going forward because of some of the things I’ve talked about, increasing rents, construction costs, and interest rates, you’ll see that temper and slow down. 

On transaction volume, 2022 is a fairly strong year if you look at its total volume of transactions.

You see cap rates flatten. But when you dive into it month-by-month, transactions tell a different story. The first half of the year was a record in 2020. The back half of the year was basically “all stop.” Every single product type had tremendous activity in the first half of the year. Interest rates started moving up, transaction volume started to slow — and it’s a slack tide period. Buyers are going, “wait for a second” and sellers aren’t willing to take less money yet. But that will change. 

Read the Tampa Bay Business Journal’s full recap here and download he presentation slides here.

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