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Broward County Ranks Among Most Competitive Rental Markets In U.S.

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Broward County ranked the fourth most competitve market for renters in the U.S.

Apartments remained vacant an average of 41 days in the county, with 95.5% of its apartments occupied, 67.2% of its leases renewing and 14 renters competing for each available apartment.

Miami-Dade County ranked at the top of the list.

The report from rental listing website RentCafe scored 137 areas across the U.S. based on the average number of days an apartment stayed vacant, the percentage of occupied apartments, the number of prospective renters per available unit, and the lease renewal rate between the months of January and March.

Under that criteria, Miami-Dade County was ranked at No. 1 with a competitive score of 120. According to the report, apartments stayed vacant for an average of only 33 days – the shortest span of any other area in the top 20.

In RentCafe’s previous report, released in March, North Jersey was named as the most competitive market in the U.S.

Palm Beach County was the No. 20 most competitive rental market where apartments stayed vacant an average of 38 days, 95% of the apartments are occupied, 11 prospective renters competing for each available apartment and there’s a 59.5% renewal rate.

Another three Florida communities made RentCafe’s top 20 most competitive market list: Southwest Florida (No. 3), Orlando (No. 8), and Tampa (No. 19).

“Developers in Florida have been busy completing new apartments. However, this is still not enough to keep up with pent-up demand, which is why Florida markets are claiming the first spots on our list,” the RentCafe report stated.

 

Source:  SFBJ

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Commercial Real Estate Investor Sentiment Signals A Changing Outlook

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As we round the halfway mark of 2022, dynamics are shifting in the commercial real estate investment environment.

Preliminary data from SitusAMC Insight’s second quarter 2022 institutional investor survey shows changing preferences among property segments.

Compared to the previous quarter, the percentage of investors selecting industrial as the best property type over the next year plummeted from 47 percent to 11 percent, citing major concerns that the sector is overpriced. Apartment was the most favored segment among investors; 56 percent of investors ranked apartment as the best sector, up from 21 percent last quarter.

Skyrocketing mortgage rates are putting a crimp in single-family affordability, resulting in strong demand conditions for apartments. Several investors also remarked that apartments were the best inflation hedge among the property types. Retail appears to be making a comeback, with investor preference for the sector climbing to 33 percent from just 11 percent last quarter, citing opportunity for yield plays. Investor sentiment on office, on the other hand, is extremely bearish; no investors selected it as the top property type, with the sector falling from 16 percent in first quarter.

SitusAMC is seeing these sentiment shifts play out in their client work. After so many quarters of seemingly unstoppable growth, the industrial sector is starting to show initial signs of a slowdown, even though fundamentals are still strong. While rents are still growing in most markets and investors are still anticipating widespread above-inflationary rent growth and are underwriting to these assumptions, it is unrealistic to expect another quarter of 8 percent to 12 percent rent growth. Meanwhile, the buyer pool for industrial has been shrinking since the beginning of the year, and some of the larger portfolios are not being financed or traded.

Some Value Deterioration

The value driver for apartments in the second quarter was market rents and rent growth. There is still very strong sales activity, but, as with industrial, there are fewer investors at the table when the bidding reaches the best and final round. Regardless, the fundamentals remain very strong. For the first time in several quarters, low-rise apartments are performing better than garden apartments. Suburban is still outperforming urban, but some urban locations are showing signs of growth.

Investment rates are not decreasing across the board— they are very specific to the assets and the submarket. Gateway markets are lagging but improving. New York is the leader of the gateway markets, and Chicago is seeing improvements in rent growth, which is translating into some value improvement. San Francisco is starting to produce positive indicators as well, and Boston and Seattle are experiencing growth momentum. SitusAMC Insight’s proprietary multifamily affordability indexes indicate improved affordability in gateway markets vs. affordability deterioration in non-gateway metros.

SitusAMC’s retail valuations were slightly up in second quarter. Leasing activity has picked up, with many reflecting short-term mid-pandemic leases that are expiring and being renewed. A couple of large deals involving grocery-anchored centers have signaled very strong cap rates, in the low-to-mid 4 percent range, in strong markets like San Diego and Miami. However, these rates were negotiated at the beginning of the year when the debt markets had not yet changed.

Some SitusAMC clients are repricing their assets down slightly because of the debt market environment. In addition, recent strong retail sales are unlikely to continue as inflation erodes consumers’ disposable income and redirects spending to everyday necessities like gasoline and food. Retail outlets that provide essential goods, such as neighborhood and community centers with grocery anchors, will likely maintain steady income streams. Malls could be hurt by the decline in nonessential spending.

Office values remained relatively flat in the second quarter; most of the increases in values seen were owing to contractual rent increases. Overall office values are skewed, however, by strong growth in life science. SitusAMC is seeing many tenants downsizing. Daily office occupancy is mired around 40 percent, and it might not exceed 60 percent in the long term. There has been a flight to quality as employers try to attract top talent during a tight labor market.

On the bright side, near-term market rent growth has steadily increased over the past year, however, and is getting closer to the standard 3 percent. The strongest growth markets continue to be in the Sun Belt and the suburbs, which are doing better than CBD and gateway markets, but rents are increasing in those areas, as well. There have also been a lot of early renewals—near 10 percent, the highest level since 2015—though this is partly due to leases that expired during the pandemic and were renewed on a short-term basis.

 

Source: Commercial Property Executive

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Multifamily Land Grab Expected To Slow As Interest Rates Rise

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Rising interest and insurance rates are projected to slow down South Florida multifamily investments following a year of frenzied buying, according to a recent report from Franklin Street.

Dan Dratch, director of multifamily investment sales at Franklin Street’s Fort Lauderdale office, says real estate investors and developers could hesitate even as apartment rental rates continue to soar and vacancies shrink.

“We have been in such a low interest rate environment, which has been fueling sales in the last couple of years,” Dratch said. “There’s a little bit of uncertainty… [Investors] want to know if it costs more to borrow the money and put more money down, or pay less.”

Adding to the uncertainty is rising property insurance rates in the wake of extreme weather events. This hurricane season is expected to be a particularly busy one.

“I know owners who are seeing a 20% to 30% increase on insurance, sometimes higher,” he said. “We have not been hit with a major hurricane [in five years]. If that happens now, it will affect things even further.”

South Florida saw significant rent growth in the first quarter of 2022, according to a Franklin Street report on the multifamily market, with year-over-year rents increasing 16% in Miami-Dade, 20% in Broward, and 23% in Palm Beach County.

At the same time, multifamily buildings were trading at premium rates.

In Miami-Dade County, each apartment unit averaged at $412,612 for new top-of-the-line Class A buildings, $327,394 for Class B buildings, and $207,592 for Class C.

In Broward County, units averaged $419,137 per unit for a Class A, $313,599 for a Class B, and $205,736 for Class C apartment buildings.

In Palm Beach County, apartments averaged at $413,253 per unit for a Class A, $320,410 for a Class B, and $206,812 for a Class C apartments buildings.

There weren’t many available apartment units on the market during the first quarter either.

Palm Beach County had a vacancy rate of just under 1%. Miami-Dade’s dropped to 3.3%. Broward’s vacancy rate increased slightly from the previous quarter to 4.1%, yet the county “also saw more deliveries than the other two counties in the market,” the report stated.

When it came to construction deliveries, Broward County led the tri-county area with 719 apartments added in the first quarter of 2022. In Miami-Dade, 497 new apartment units were added. In Palm Beach, 171 units were completed.

All three counties had fewer apartments finished in the first quarter of 2022 than in each of the quarters of the previous year, the report noted.

In spite of rising interest rates, labor shortages, and supply chain issues, construction of new apartment units are still “above historical averages,” the Franklin Street report noted. In the first quarter, development has commenced on 1,402 multifamily units in Broward, 869 in Miami-Dade, and 976 in Palm Beach County.

The confluence of apartment building transactions, low vacancies, and migration of well-paid remote workers propelled rents in South Florida during the pandemic. Multifamily investors were quick to seize the opportunity and bought up properties at a record pace.

“Most of the owners we were talking to were surprised that they got into a situation where tenants are creating a bidding war for the unit,” Dratch said.

Often, when longtime local renters were given rent increases, they would renew, unable to find cheaper options.

“They are finding it might be worse elsewhere,” Dratch.

While rents are going up everywhere in the United States, the average rents in South Florida are higher than the national average.

According to the National Association of Realtors, the average effective rent — meaning the average rent a landlord receives after deducting expenses such as leasing commissions and tenant improvements — throughout the U.S. was $1,578 a month in the first quarter of 2022, a 12.2% increase over the year before.

 

Source:  SFBJ

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Rents Creeped Up, Vacancies Fell Across South Florida At Year-End 2021: Report

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Monthly home rents are rising sharply across South Florida, with some communities seeing as much as a 34% annual increase in December compared with a year ago.

While locals largely blame the wave of newcomers to the Miami and Fort Lauderdale areas, experts say there are solutions: build more apartments priced affordably for the working class and companies should boost wages.

Residents here are contending with the perfect storm. There’s been a steady migration in the pandemic of people coming from states with higher wages and cost of living who view Miami apartments as a deal, many firms are relocating to South Florida and there’s a pipeline of apartment buildings where rents range from $1,800 a month to $2,800 for studios and one-bedroom units.

“We have had very few affordable apartments,” said Jack McCabe, owner of McCabe Research & Consulting, a real estate and economic research firm in Deerfield Beach. “People (from the Northeast and Midwest) consider $2,200 for an apartment a great deal compared to where they are coming from. They also have more cash in the bank than people in Miami do. People in Miami can’t afford this, because their salaries are not going up as high.”

Zillow, an online real estate marketplace, reported that rents rose annually in the tri-county area — Miami-Dade, Broward and Palm Beach counties — to an average of $2,564 in December, up 30%. Real estate brokerage Redfin said in Miami apartment price tags soared year over year to an average of $3,020 monthly in December, a 34% jump.

South Florida’s annual rent hikes exceeded that of New York City and Atlanta, but the asking rates fell in the middle. According to Zillow, New York City had an average rent of $2,772 in December, up 16% from a year ago. Atlanta had an average rent of $1,882, up by 22%.

Rent increases show zero signs of subsiding in this region, experts say.

McCabe said people living in older rental homes also are seeing price increases of 8% to 12% a year.

“It’s still significant, because their income hasn’t gone up 8% to 12%,” he said. “Many people are struggling with their housing cost. Many are paying 50% (of incomes) for their housing expenses. It leaves little or nothing for a car, vacation, kids or even playing a round of golf. It has cut into their lifestyle.”

On the other hand, the area’s home sales market provides little relief to prospective buyers, with steady price increases for houses and condominiums. Miami-Dade County has a median sales price now of $525,000 for houses and $355,000 for condos, while Broward has a median sales price of $500,000 for houses and $236,000 for condos.

Inventory of homes for sale is limited, too. Miami-Dade has two months of supply of houses to buy, and 3.3 months of condos. Broward has 1.1 months of houses on the market, and 1.7 months of condos. A balanced housing market typically consists of six to nine months of inventory for sale.

“For now, buyers are showing up to a store where the shelves have been picked clean and the buyers are fighting over the last loaf of bread,” said Jeff Tucker, a senior economist at Zillow.

Priced-out buyers in Miami will continue to rent, experts say. Many will look to live in the urban core, including Brickell, downtown and Edgewater, where many firms are opening offices. The urban core is experiencing a resurgence of activity in recent months after renters exited these neighborhoods early in the pandemic that began in March 2020, to find homes with more square footage and green space.

Experts say to alleviate the burden of higher rents on consumers more development of affordable and workforce housing and wage increases are necessary. McCabe said the Miami area needs 40,000 affordable housing units, thousands more than what’s in the pipeline in Miami-Dade and the city of Miami.

The reality is expect more transplants coming to South Florida, said Jeff Andrews, a data journalist at online real estate marketplace Zumper, and that means more rent increases this year.

“You still have a housing shortage and renters are still looking to move to their new pandemic reality, because they didn’t in 2020,” Andrews said. “Homeowners did. Renters don’t have the capacity to pick up and move whenever they want. They have to wait, plan for a deposit and save up.”

The list of expected newcomers includes 29-year-old Keyao Pan, a Florida International University history professor. After completing a yearlong post doctorate fellowship at Harvard University, Pan will relocate to Miami this summer.

“FIU is a great place, it does a lot of research,” said Pan, who holds a doctorate from University of Chicago. “I can count myself very lucky, because I know people who had a 10-year gap when they graduated and then they had a stable job.”

He pays $1,400 a month for a 700-square-foot studio apartment in Cambridge, below the $3,637 monthly average for a one bedroom in the Boston area, according to a December Redfin rental report. He hopes to find a 1,000-square-foot, one-bedroom unit for $1,500 a month near the FIU main campus in west Miami-Dade or in nearby Doral. If he can swing it, Pan said, he wants to buy a home with family help for less than $350,000.

“Both Chicago and Cambridge have a higher cost of living,” he said. “Miami is still more affordable than places in the Northeast. It is a growing market.”

Also, investors are swooping in to Miami and Fort Lauderdale areas, buying condo units and then getting high monthly rents for them. South Florida renters may finally get price relief in 2023, McCabe said. That’s because home sellers in the Northeast looking to move south may have a tough time unloading their houses or condos, because they will follow so many people from that region that already have exited, he said.

“The big question,” McCabe said, is “will we see more people moving to South Florida” in 2023 to keep boosting apartment rents.

 

Source:  Miami Herald

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