South Florida Multifamily | Q2 Update

Miami-Dade

The Miami-Dade apartment market is comprised of 124,716 units ranging in size from the 17,328-unit South Miami Beach Bayshore submarket to the Kendall West submarket, which accounts for 4,416 units. In the last ten years, the Miami submarket has experienced the greatest introduction of new inventory, 6695 units, amounting to 40.7% of all new market rate rentals added to the market.

During the second quarter of 2017, asking rents increased by 2.6% to an average of $1,424. Mean unit prices in the metro are as follows: studios $1,188, one bedrooms $1,250, two bedrooms $1,545, and three bedrooms $1,881. This advance extends the market’s streak of gains to twenty-five quarters, during which asking rents have climbed by a total of 30.8%. Over the course of the year rents are expected to expand by 6.3%, which is higher than the 4.6% and 4.5% recorded in 2016 and 2015.

In the past ten years, household formations in Miami-Dade have averaged 1.5% per year, representing the average annual addition of 13,700 households. The recent quarter has outperformed this trend adding 4,240 to the Miami Metropolitan Area.

By the end of the year, 3,774 units of new stock is going to be completed, increasing total completions to 5,041. In total, there are about 16,813 multifamily units under construction in Miami-Dade of which 6,453 units are condominiums.

The Miami area is experiencing large amounts of supply currently exceeding net absorption. Vacancy levels are currently at 4.7% but are expected to rise to 5.6% by then end of the year and are going to remain stable throughout 2018.

Broward

The Broward apartment market is comprised of 86,330 units ranging in size from the 12,847 unit Miramar/Pembroke Pines submarket to the Pompano Beach submarket, which accounts for 1,521 units. In the last ten years, the Miramar/Pembroke Pines submarket has experienced the greatest introduction of new inventory, 3,330 units, amounting to 25.1% of all new market rate rentals added to the market.

During the second quarter of 2017, asking rents increased by 0.9% to an average of $1,389. Mean unit prices in the metro are as follows: studios $1,034, one bedrooms $1,175, two bedrooms $1,443, and three bedrooms $1,829. This advance extends the market’s streak of gains to twenty-two quarters, during which asking rents have climbed by a total of 23.0%. Over the course of the year rents are expected to expand by 2.6%, which represents a slowdown compared to 2015 and 2016.

In the past ten years, household formations in Broward have averaged 1.3% per year, representing the average annual addition of 9,300 households. The recent quarter has outperformed this trend adding 4,320 to the Fort Lauderdale Metropolitan Area.

By the end of the year, 2,684 units of new stock is going to be completed, increasing total completions to 3,208. The largest addition is Modera Port Royale, a 555-unit mid-rise community in the Landings neighborhood. Outside of downtown, other major projects include the 420-unit Atlantic at Cypress Creek and the 397-unit Hollywood Circle.

Even though demand remains strong in the market, the high pace in deliveries is pushing vacancy rates from 4.4% to over 5% by the end of the year. A trend which is expected throughout 2018. Until then net deliveries are expected to slow down, which will cause the market to absorb vacant stock.

Palm Beach

The Palm Beach apartment market is comprised of 30,814 units. The dominant concentrations of speculative apartment space are in the Boynton Beach/Delray Beach submarket, amounting to 15,880 units and 25.3% of the metropolitan inventory. In the last ten years, the Boynton Beach/Delray Beach submarket has experienced the greatest introduction of new inventory, 3,435 units, amounting to 36.0% of all new market rate rentals added to the market.

During the second quarter of 2017, asking rents increased by 0.7% to an average of $1,428. Mean unit prices in the metro are as follows: studios $1,058, one bedrooms $1,176, two bedrooms $1,490, and three bedrooms $1,788. Over the past four quarters, asking rents have risen a total of 4.5%, up from $1,367. Over the course of the year rents are expected to expand by 4.7% which is outpacing growth in 2016 but below the growth of 6.7% experienced in 2015.

In the past ten years, household formations in Palm Beach have averaged 1.5% per year, representing the average annual addition of 8,600 households. The recent quarter has outperformed this trend adding 5,140 to the Palm Beach Metropolitan Area.

By the end of the year, 2,239 units of new stock is going to be completed, increasing total completions to 3,243. Apartment development is most active in Boca Raton, Delray Beach, West Palm Beach, and Boynton Beach. The largest project under development is the 800-unit Minto West/Westlake Apartments in Loxahatchee. The project, from developer Minto Communities, broke ground in April. Among the next to deliver, due online this July, will be the 398-unit Altis Boca Raton mid-rise from Altman Development. Also in Boca Raton, an August finish is expected for the 370-unit 850 Boca complex from CC Residential. And an August completion is expected as well for LeCesse Developmentā€™s 341-unit 500 Ocean mid-rise in Boynton Beach.

The Palm Beach residential markets experiences signs of oversupply as completions are outpacing demand vacancies are expected to rise from a current 4.4% to 5.2% by then end of the year and are continuing to rise throughout 2018.