Berkadia’s 2017 Market Forecast sees rent growth accelerating this year

Strong employment growth, rising wages and continued population growth point to another strong year for South Florida’s apartment market, according to the newly released Berkadia 2017 Market Forecast. South Florida is expected to outperform the country as a whole in such categories as job growth and average asking rent growth in 2017, according to the report. And while another record-breaking year of new multifamily deliveries is expected to drive vacancy up slightly in 2017, demand will remain strong.

“The GSEs will continue to aggressively pursue business in 2017,” said Mitch Sinberg, Senior Managing Director of Berkadia’s South Florida division, which closed $2 billion in investment sales and financing transactions in 2016. “They continue to innovate with new, highly successful products and programs, which provide borrowers with assets in transition with a higher cash-on-cash yield.”

“I believe 2017 will bring a strong market for multifamily sales, similar to what we saw in 2016,” added Tal Frydman, Senior Director, Investment Sales, of Berkadia’s South Florida offices. “While the market appeared to pause during the presidential election, we anticipate that by mid-year sales will equal or surpass last year’s total. Population and job growth will continue to create strong rent growth and the units delivered will be briskly absorbed. As a result, we believe pricing expectations will not change from last year, and will not be impacted by any increase in treasury rates.”

South Florida ranked among the top metro areas nationally for apartment supply growth in 2016, just behind Houston and Dallas-Fort Worth, with 10,340 new units delivered over the past 12 months – the largest annual growth in inventory since 2007. Total deliveries in 2017 will exceed last year’s high water mark, with another 12,040 apartments expected to come online by December 2017.

Other highlights of the South Florida 2017 Market Forecast:

Total non-farm employment is forecast to expand by 2.9% by year end – above the national average of 1.9%

Approximately 10,440 newly occupied units will be absorbed in 2017, outpacing the previous five-year average of 8,620 units.

Average asking rent decelerated in 2016 to 2.9%, but is expected to increase in 2017 to 4.4% ($1674 per month). This is above the national average of 3.3% ($1335/month).

Deliveries (12,040) are expected to exceed leasing activity (10,440) in 2017, pushing vacancy up by about 10 basis points year over year, from 5.1% to 5.2% in 2017.

Lending conditions in 2017 will also favor investment in South Florida’s multifamily market, with interest rates still at historic lows and new “green” lending programs offering investors strong incentives for the improvement of value-add multifamily properties.

“We anticipate a brisk pace of activity over the next several months, with buyers who have been sitting on the sidelines entering the market now, or owner/operators taking advantage of low rates to refinance or convert bridge loans to permanent loans,” said Berkadia Senior Managing Director Charles Foschini, also in South Florida.

About Berkadia®:

Berkadia, a joint venture of Berkshire Hathaway and Leucadia National Corporation, is a leader in the commercial real estate industry, offering a robust suite of services to our multifamily and commercial property clients. Through our integrated mortgage banking, investment sales and servicing platform, Berkadia delivers comprehensive real estate solutions for the entire life cycle of our clients’ assets.

To learn more about Berkadia, please visit www.berkadia.com.