Apartment inventory growth expected to slow over coming 18 months
South Florida apartment rental rates, which have been on a steady upward trajectory since 2013, began to level off this quarter as a post-recession high of 10,576 new apartment units were delivered over the last four quarters, according to Berkadia’s Q2 2017 South Florida Multifamily Report. With occupancy still hovering near 95%, however, and South Florida’s economy chugging along, demand is expected to keep pace with new supply in the foreseeable future.
“We’re still playing catch up from the recession, when no new apartment product was built, which is why the volume of new deliveries hasn’t put much of a dent in occupancy or rental rates,” explained Mitch Sinberg, Berkadia Senior Managing Director. “In addition, a lot of the institutional apartment inventory from the prior real estate cycle was converted to condos and removed from inventory, so we have had to build more just to catch up with where we should have been at the start of this cycle.”
According to the report, leasing activity jumped dramatically over the past 12 months. South Florida renters newly occupied 5,986 units since mid-2016, nearly five times the number of units absorbed in the preceding year. Apartment inventory will continue to grow, though at a slower rate, as construction is underway on 68 properties slated to bring more than 18,500 units online by year-end 2019.
A big driver of apartment supply growth in South Florida is the unprecedented opportunity to build adjacent to mass transit. The Brightline – a new commuter rail that connects the downtowns of Miami, Fort Lauderdale and West Palm Beach – begins service this fall.
“This is really a new paradigm for South Florida,” said Charles Foschini, Berkadia Senior Managing Director. “We lacked the infrastructure, and the necessary mindset, to make transit-oriented development viable in the past. That’s completely changed – there’s a huge appetite among renters to live in an area where they can reach a large swath of South Florida without getting in a car, and forward-thinking developers are seizing the opportunity now to address that pent-up demand.”
Lenders also view residential projects with a transit or affordability component favorably and receive more attractive financing terms, according to Berkadia. Read the full report here.
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.
