Rental Market Predictions for 2025: The State of Rentals in Southwest Florida

By Michael McVety, President of Red Fortress Property Management

Happy New Year and welcome to 2025! As we begin a new year, the rental market is top of mind for many renters, landlords, and investors. In this blog, we’ll explore rental market trends for 2025, including national insights, local data for Southwest Florida, and my predictions for what lies ahead. With 440 properties under management spanning all classes, Red Fortress has a strong pulse on the rental market. Let’s dive in!

National Rental Trends: What’s Happening Across the U.S.?

1. Multi-Family Market: Rising Supply and Lower Occupancy Rates

• National occupancy rates in the multi-family sector are currently at a low point not seen since the early days of the pandemic (2020 Q2).

• Developers are introducing new inventory across various markets, yet the demand isn’t keeping up. This is leading to increased vacancy rates and rental concessions (e.g., two or three months of free rent with a lease).

2. Single-Family Rentals: Flat Growth

• Single-family rental occupancy is at a decade low of around 91.5% as of November 2024.

• Rental price growth has stagnated nationally, with zero average year-over-year increases for renewals—the lowest growth rate in 13 years.

Southwest Florida Rental Market: Key Data and Insights

1. Fort Myers and Cape Coral See Declining Rents

• Multi-Family Rentals: Fort Myers brought 2,200 units online in 2024, with an additional 6,700 units under construction (a 28% inventory increase).

• Impact:

• Lee County experienced the largest rent decline in the nation at 5.5%.
• Collier County followed closely with a 4.5% drop.

• Vacancy Predictions: Expected to rise from 8% to 17%, influenced by increased inventory and slowing demand.

2. Competition for Single-Family Rentals

• Local single-family rentals are increasingly competing with multi-family properties offering concessions, which has led to downward pressure on rental rates.

3. Price Drops in Home Sales

• Year-over-Year Changes (2023-2024):

• Cape Coral/Fort Myers home prices fell by 6%.
• Naples prices declined by 4%.
• Punta Gorda prices saw an 8% drop.

• Inventory Surge:

• Fort Myers and Cape Coral have tripled their inventory in just two years, while Naples has nearly doubled its inventory in the same timeframe.

Predictions for 2025: What to Expect

Here’s what I believe will define the rental market in Southwest Florida and beyond this year:

1. Rental Rates

• Lower-End Rentals:

• Rates will remain flat as renters lack discretionary income for increases, with inflation and high costs of essentials (like food and gas) keeping budgets tight.

• Higher-End Rentals:

• Expect continued declines due to an oversupply of inventory and increasing competition from multi-family properties.

2. Insurance Costs

• Property Insurance:

• Will continue to rise slightly due to inflation and recent hurricanes. Relief may come in 2026 or 2027 if Florida avoids additional major storms.

• Flood Insurance:

• Rates are unlikely to drop due to significant losses incurred by insurers.

3. Property Taxes

• Taxes should stabilize or even decline slightly in the coming years as property values dip. The real impact will likely be felt in 2026-2027.

4. Investor Opportunities

• The next two years (2025-2026) will be ideal for purchasing investment properties at lower prices.

• While rental rates are currently flat, they are projected to climb in 2-3 years as the market stabilizes.

Unique Local Insights

At Red Fortress Property Management, we’ve observed some interesting trends in 2024:

• Applicant Challenges: Many prospective tenants requested lower income requirements to qualify for rentals, a sign of tightened budgets.

• Steady Vacancies: Vacancy numbers held steady year-over-year, but we’ve noticed a 30% drop in new applications.

• Why? Renters are staying put, likely waiting for the market to stabilize amidst economic uncertainty.

Final Thoughts

The Southwest Florida rental market is in a period of adjustment, with trends influenced by local factors like oversupply, insurance costs, and post-hurricane impacts. However, there’s no reason for panic. While challenges exist, opportunities are emerging for both renters and investors willing to adapt.

If you’d like to discuss these trends or share your thoughts on the 2025 rental market, feel free to reach out to me at mike@redfortresspm.com or call 239-939-1233, extension 306. I’d love to hear from you!

Here’s to a prosperous 2025!