Elevated Apartment Construction Softens Jacksonville HMA Rental Market

Elevated Apartment Construction Softens Jacksonville HMA Rental Market

T. Michael Miller is a regional economist in the Jacksonville Field Office for HUD's Economic and Market Analysis Division.

HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.

The Jacksonville Housing Market Area (Jacksonville HMA) in northeast Florida is coterminous with the Jacksonville, FL Metropolitan Statistical Area (MSA) and includes Baker, Clay, Duval, Nassau, and St. Johns Counties. The city of Jacksonville, which encompasses 875 square miles, is the largest incorporated city in the continental United States by area. Jacksonville accounts for approximately 58 percent of the HMA’s population and is the most populous incorporated city in Florida. The HMA’s population was estimated at 1.73 million as of January 1, 2024. Population growth in the HMA has been strong since 2013, averaging 31,200 people, or 2.0 percent, annually because of strong job growth and the subsequent strong in-migration to the HMA. During this period, net in-migration averaged 27,450 people annually, nearly three times the average net in-migration of 9,750 people annually from 2010 to 2013. A recent Comprehensive Housing Market Analysis highlighted the Jacksonville HMA and reflects local conditions as of January 1, 2024.

Economic expansion in the Jacksonville HMA during the past year was partly attributable to corporate headquarters expanding and relocating to the HMA

The Jacksonville HMA's economy is strong and, although job growth has slowed slightly in the most recent 12 months, the economy has returned to the growth rate it had before the COVID-19 pandemic. During 2023, nonfarm payrolls in the Jacksonville HMA increased by 33,900 jobs, or 4.4 percent, to 805,700 jobs, down slightly from the 5.0 percent rate of job growth during the previous year. Job growth in the HMA exceeded the national growth rate of 4.3 percent in 2022 and 2.3 percent in 2023. During 2020, as a result of the COVID-19 pandemic, nonfarm payrolls declined by 18,200 jobs, or 2.5 percent, following average annual job growth of 20,100 jobs, or 3.0 percent, from 2015 through 2019.

With 131,900 jobs, the professional and business services sector is the HMA's largest sector, accounting for 16 percent of nonfarm payrolls. Four Fortune 500 companies — CSX Corporation; Fidelity National Information Services, Inc.; Fidelity National Financial, Inc.; and Landstar System, Inc. — are among more than 150 companies that have corporate headquarters in the HMA (JAXUSA Partnership, a division of JAX Chamber). Blue Cross and Blue Shield of Florida, Inc., and Southeastern Grocers, with 5,700 employees each, also maintain corporate headquarters in the HMA and are among its 10 largest employers. Job growth in the HMA occurred in all payroll sectors during 2023, led by the professional and business services sector, which increased by 7,100 jobs, or 5.7 percent. The education and health services sector increased by 6,600 jobs in 2023, a 5.6 percent increase from the previous year.

During the next 3 years, nonfarm payrolls are expected to increase by an average of 2.3 percent annually to 855,600 jobs. Ongoing construction at Riverfront Jacksonville — a $1.1 billion public and private development on the Northbank of the St. Johns River — and RiversEdge — a $693 million mixed-use development on the Southbank of the St. Johns River — is expected to support growth in the construction subsector during development and in the professional and business and the leisure and hospitality sectors as phases are complete.

Despite strong population growth in the HMA, rising mortgage rates and a limited inventory of for-sale housing contributed to declining home sales, and elevated apartment construction contributed to rising apartment vacancy rates

The home sales market in the Jacksonville HMA is balanced, with an estimated vacancy rate of 1.8 percent as of January 1, 2024, down from 2.0 percent in April 2020. Since 2022, elevated mortgage interest rates and rising home prices have dampened home sales. In addition, the inventory of homes for sale remains low, in part because some potential sellers are reluctant to give up the historic low interest rates they currently enjoy; the interest rate for a 30-year, fixed-rate mortgage averaged 3.15 percent, 5.53 percent, and 7.00 percent during 2021, 2022, and 2023, respectively (Freddie Mac). In December 2023, the HMA had approximately 2.8 months of inventory, down slightly from the 2.9 month supply a year earlier (CoreLogic, Inc.). This limited inventory has spurred rising prices despite declining home sales. During 2023, home sales fell 22 percent year over year to 39,650 homes sold. During the same period, the average home sale price increased 5 percent year over year to $403,000. Rising interest rates also encouraged builders to cut back on new home construction. During 2023, 11,400 new homes were permitted, a reduction of 25 percent from the previous year. During the next 3 years, demand is estimated for 39,250 new homes.

The overall rental market in the HMA is soft, with an estimated vacancy rate of 11.0 percent, up from 9.5 percent in April 2020. Although rental construction is scattered throughout the HMA, nearly two-thirds of the units under construction are in the city of Jacksonville. Elevated construction rates since 2021 have resulted in rising vacancy rates and moderating rents despite strong in-migration to the HMA. The apartment vacancy rate was 13.5 percent as of the fourth quarter of 2023, up from 9.8 percent in the fourth quarter of 2022, and the average apartment rent declined 2 percent year over year to $1,471 (CoStar Group). Even though the rental market has softened significantly, the number of rental units permitted remains elevated compared with the previous decade. Rental permitting decreased 6 percent to 8,950 units during 2023 but was at least 73 percent higher than during any year from 2010 to 2020 and more than double the annual average during the period. During the next 3 years, demand is estimated for 14,300 rental units.