Luxury rentals will likely take longer to lease. But the demand for moderate and workforce housing will likely continue to grow, according to a new report by Berkadia, which specializes in multifamily and commercial realty services.
Rents rose by just 1.8% in the tri-county area in the third quarter of 2019, according to Berkadia’s latest South Florida Multifamily report. In comparison, rents rose by 2.8% in the third quarter of 2018.
The slowdown makes sense, said Charles Foschini, senior managing director and co-leader for Berkadia, given the increased number of units in the market, which covers Miami-Dade, Broward and Palm Beach counties. “There’s competition for a renter pool that is vibrant but selective.”
The survey measures the change in average rents, occupancy, the number of new apartments, and how quickly the new units were leased.
In South Florida, 10,755 new rental units were added to the market over the past year. Since the beginning of 2019, 8,763 units were delivered. Yet despite the increase in inventory, occupancy was almost 96%. The largest individual project to begin signing leases was the 667-unit Art Plaza in Miami’s Arts & Entertainment District, due for completion by the end of the year.
Development focused on central business districts. Almost one-fifth of the inventory added over the past 12 months — a total of 1,965 units — were in downtown Miami/South Beach. The next greatest concentration of new units was in Fort Lauderdale, with a total of 1,272.
Overall, renters are spending more time in their homes, said Foschini, thanks to increased amenities both in their complexes and their neighborhoods and the increasing price of renting.
The growing population in the urban core is attracted to live-work-play environments accessible in Brickell and Downtown Miami, said Foschini. That means developers looking to build in the urban core or in other sub-markets with a booming live-work-play environment will find plenty of renters.
The region’s total inventory is 604,915 units.
The rate of absorption outpaced delivery for the first time since 2014. Still, average rents decreased in urban areas, with a 2% drop in Coral Gables/South Miami, 0.3% in downtown Miami/South Beach; 0.4% in West Miami/Doral and 1.6% in Fort Lauderdale.
Increased supply in those neighborhoods led to the drop in prices, said Foschini.
However, average rents rose in Coral Springs (by 4.4%), Miami Gardens (4.4%), Northeast Miami (4.6%), Hialeah/Miami Lakes (3.9%), North Central Miami (3.7%), Homestead (3.5%) and Margate/Coconut Creek (3%). Across South Florida, rent increased to $1,648 a month, up by 1.8% year over year.
Hialeah is unlike most other areas, explained Foschini: “Hialeah is an area that never had institutional properties developed in 20 years.” That is, until BBX Capital Real Estate and Altman Companies sold the 314-unit Altis to AvalonBay Communities for $90 million. Rent for a one-bedroom unit starts at $1,590 a month. That new product, said Foschini, was quickly absorbed.
Congestion and renters’ desires to live close to work likely led to rent increases in the other submarkets. “Those are all markets that have not had a new product. As Miami becomes more congested, projects [in these areas] will be successful because renters will live-work-play in the same community and skip the congestion,” said Foschini.
The study reconfirmed findings by many others: that local renters spend more per year to lease than the rest of the country. A share of wallet — or the effective rent as a percentage of the median household income — is 32.3% in South Florida compared to 27.2% in the States.
Not only are rents higher, but the median price of a single-family home also increased by 2.6% from $352,500 to $361,700 year over year.
As land and development costs increase in South Florida, rents will rise, too, said Foschini.
But trends bode well for moderate and workforce renters who want to upgrade. “As rents get higher, there will be less renters in the luxury market. It’ll take longer to lease these products,” — which could mean lower rents on those upscale units.