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All Those New Apartments in South Florida Still Aren't Enough, Report Says

Berkadia Analysis Shows Demand Greater Than Supply
July 23, 2018
It may seem that an apartment complex is going up on every street corner in South Florida, but a new report shows that builders actually have some catching-up to do.

Renters moved into 9,155 units across the tri-county region in the first half of 2018, while deliveries totaled 6,336 over the same period, according to Ambler, PA-based commercial real estate services firm Berkadia. That’s the first time in three years that demand exceeded supply.

The 9,155 apartment absorptions were about three times the number from the first half of 2017. Over the past four quarters, renters occupied 14,885 units, almost four times more than the preceding year.

Charles Foschini, Berkadia’s co-managing director in South Florida, told CoStar News that he attributes the upswing in move-ins largely to a recent surge in professional jobs outside the service industry.

“Our state in general, and South Florida specifically, have been the recipients of some sustainable job growth,” he said.

Apartment construction lagged during the Great Recession and housing bust in the past decade, analysts noted. Apartments converted to condominiums and tighter lending requirements also led to a shortage of available units in the market.

Another factor contributing to strong rental demand is higher home prices that are keeping young professionals and families from affording places of their own, Foschini and other observers said.

The median single-family home price in South Florida rose 8 percent over the past year to $353,100, according to Berkadia.

“A lot of the higher home prices in South Florida are due to the increased demand from wealthy South Americans who come in with cash deals and blow the competition away,” said Ken Thomas, a Miami-based economist with Community Development Fund Advisors.

Second quarter occupancy rates in most tri-county communities eclipsed 90 percent, though Hialeah in Miami-Dade County had the highest at 99 percent, the Berkadia report shows. Monthly rents in Hialeah increased 2 percent to $1,404.

Not surprisingly, Miami had the most deliveries over the past year with 2,318 new units, according to the report. No. 2 for deliveries was the much smaller Boynton Beach / Delray Beach market with 1,334.

Meanwhile, rents continue to inch upward, though not at the same level as in previous years, due to more supply.

Average rents in South Florida are at about $1,500 a month, according to CoStar Market Analytics, which projects rents will increase by only 1 percent over the next couple of years, with some buildings possibly facing lower rents.

“We do not expect to see the rent gains we were seeing in 2015 again this cycle,” said Pamela Stergios, a market analyst with CoStar.

Paul Owers, South Florida Market Reporter  CoStar Group   
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