Construction of condos is now a major episode in Florida’s Tampa Bay area. Condos that offer spectacular view of the Gulf are the most enticing developments. Seeing an influx of people en masse, camping out in Tampa Bay on the lookout for acquiring new condo units, one would realize that the mass appeal of Tampa Bay is really not about the Super Bowl. Most investors of the Tampa Bay condo market purchase units at pre-construction prices and then sell them at profits of as much as 25%, even before these condos are ever built. Many people say they would rather invest in condos than place their money in higher risk involvements, such as the stock market.

While a considerable number of investors have switched from stock to real estate as investments, because of projected higher returns as well as relatively greater investment security, other people buy condos as second homes with future plans to retire in beautiful, sunny Florida. Unsurprisingly, many small family-owned hotels are being snatched up by real estate developers to construct new condo communities.

Purchase popularity in the Tampa Bay condo market is seen by many as being fueled by low interest rates. The purchases, however, include buying with a mortgage, as well as with cash for condo units priced significantly higher $500,000. Prices, currently ranging from $300,000 to quite a bit more than $1 million, continue to escalate and will continue to do so as long as high demand flourishes.

In 2005, condo conversions dominated Tampa Bay condo market as 40 communities, equivalent to 14,231 apartment units, were purchased by real estate developers for conversion to condos. This figure reported for 2005 tops the corresponding figure for 2004 by as much as four-fold. However, in 2006 Tampa is witnessing a declining interest from conversion buyers after high conversion activity over the last three years.

The condo conversion craze significantly shrank the supply of apartments. The law of supply and demand triggers into action as seen in the current performance of the apartment market being experienced this year. Apartment deliveries, however, remain low, and this is because of a shortage of developable land as well as increasing construction costs. These two major factors are noteworthy in making it difficult for developers to enter the Tampa condo market. As the delivery of new rental units in Tampa continues to decline, strong rent growth at existing properties are expected to persist.

In the first quarter of 2006, Tampa’s average rent reached $819, increasing an average 5.5% over the corresponding period in 2005. Certain properties and submarkets reported boosts within the 10-20% percent increase range. Rents range from about $700 to over $1,000 per month, depending on the location. Prevailing averages are now between $805 and $834. Occupancy rates reached 98.1% in the first quarter 2006. This trailed the steady growth in occupancies since early 2003, and makes Tampa Bay one of the Florida’s most highly occupied rental markets.

The Tampa rental market showed minimal signs of new development over the past year. With developable land becoming scarce, developers moved north along the I-75 corridor into Pasco County which added approximately 1,460 rental units, showing one of the strongest increases in apartment supply throughout the state. Pasco’s growth, while significant, was still not enough to offset the more than 14,000 units purchased for conversion here in 2005.

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