August 2, 2019
By David Cohen
Apartment inventory growth in South Florida has outpaced leasing activity in recent years, according to Berkadia’s Q2 2019 Multifamily Report. Construction has been completed on 8,555 units since the second quarter of 2018, down from 12,562 during the previous year.
Connect Media asked Jaret Turkell, senior managing director of investment sales in Berkadia’s Miami and Boca Raton offices, to share insights about South Florida’s multifamily market. Check out his responses in our latest 3 CRE Q&A:
Q: Deliveries and new construction in South Florida seem to be slowing a bit, what effect do you see that having on the market? Do you think rents will remain relatively flat in the coming future?
A: In the short-term, we may see rents flatten, or even a concessionary environment, in some submarkets. We had a fair amount of new supply delivered in South Florida during this cycle, and there’s still a bit more to be absorbed, so that’s caused the market to soften a bit. But, from a long-term perspective, demand is still incredibly strong. Over 900 people are moving to Florida every day, according to a new demographics report, and the population is expected to soar to 22 million over the next three years. So, once this new supply is absorbed, I think long-term rent growth and strong fundamentals are a sure bet.
Q: What are some of the hottest areas in South Florida for multifamily development right now?
A: I’m really excited by what’s happening in downtown Miami. Historically, this submarket has had almost no new supply of Class A apartment product, and finally that’s changing with projects like Miami World Center coming online. This will radically transform the downtown urban environment. There’s also some new product coming online along the Miami River, another area that was overlooked for a long time. Further north, Boca Raton remains a really hot submarket because of the terrific quality of life it offers: great schools, parks, restaurants and other amenities. We’ve seen some very high-quality multifamily communities in Boca trade for a premium for all those reasons. Lastly, I’d say a “submarket to watch” is North Beach, a little neighborhood on Miami Beach that’s also been overlooked. The area has been re-zoned to allow more development, and I think that would be a great place for developers to start looking for land and redevelopment opportunities.
Q: Any other trends to watch for right now in the South Florida multifamily market?
A: The market for value-add apartments remains red hot – that’s been going on for a while and not likely to cool off any time soon. In some areas, you can find opportunities to buy Class A or luxury product in an A-plus location at or close to replacement costs. Another trend we’re watching closely is co-living developments, like X Miami. It will be interesting to see if that trend catches on here in South Florida.
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Tags: Apartments & Multifamily