Page 1

MARKET VIEW | APARTMENT BROWARD | MIAMI-DADE | PALM BEACH


EXECUTIVE SUMMARY

MARKET TRENDS

BROWARD’S APARTMENT MARKET SHOWS FIRST SIGNS OF SATURATION DUE TO RECENT DEVELOPMENT BOOM

Q3 2017 APARTMENT REPORT

The apartment market in Broward currently has a vacancy

Q3 2017

Q2 2017

FORECAST

VACANCY

6.87%

g

h

NET ABSORPTION

1,209

g

b

CONSTRUCTION

6,391

h

h

COMPLETIONS

2,932

g

h

EFFECTIVE RENTS

1,454

h

g

rate of 6.87 %, which is 54 basis-points higher than last quarter. There was a positive net absorption of 1,209 units and were 2,932 units delivered in the last quarter. Effective rental rates fell by to $1,436 per unit, a first sign that the Broward market is reaching the saturation stage. At the moment, there are about 6,391 units under development. As it is becoming harder for developers to

RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

find new deals due to high construction costs and land prices, less and less new projects will break ground in the

OUTLOOK

near future. Most development is happening in the Fort Lauderdale Downtown area, Hollywood, Dania Beach and

The apartment market shows first signs of saturation as large supplies are entering

Hallandale Beach where rents justify construction.

the market. New apartment buildings are renting up quickly as people are attracted by high-luxury amenities. However, rents are declining as they reach the maximum that people are able to afford and the large supply puts downward pressure on prices. As completions are going to decline to 1,177 units in the next quarter and demand remains strong there is a good chance that the Broward market is going to experience rent increases with declining vacancy rates, since demand is still high fueled by strong population growth.

JOB GROWTH BY INDUSTRY FTL

US

SOURCE: US DEPARTMENT OF LABOR STATISTICS

INFORMATION

-4.0%

-3.0%

-2.0%

-1.0%

0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

TOTAL NONFARM MANUFACTURING MINING AND LODGING FINANCIAL ACTIVITIES OTHER GOVERNMENT CONSTRUCTION TRADE, TRANSPORTATION AND UTILITIES LEISURE AND HOSPITALITY EDUCATION AND HEALTH SERVICES PROFESSIONAL AND BUSINESS SERVICES

ONE COMMERCIAL REAL ESTATE | BROWARD | APARTMENT | Q3 2017

2


MARKET ACTIVITY

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

About 1,209 apartment units were absorbed in the past quarter and 2,932 units added to the market. Concerns about an

ABSORBTION

VACANCY

SOURCE: COSTAR PROPERTY®

3,500

8.00%

3,000

7.00%

increased by 54 basis-points.

2,500

6.00%

Job and population growth in the last years has yielded in

2,000

5.00%

1,500

4.00%

1,000

3.00%

500

2.00%

0

1.00%

oversupply of apartment units have been expressed in recent months, and the market is showing first signs of saturation as effective rental rates dropped by 0.74% and vacancies

a construction boom in Broward County. There are currently 6,391 units under development; this represents another increase to last quarter’s units under development. With the large amount of supply in the pipeline, developers are starting to become cautious in starting new projects. With land prices and construction costs reaching record heights, it has become difficult for developers to start new projects, as only certain areas offer enough density and sufficient rental rates to make projects profitable.

0.00%

(500)

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Millennials and baby boomers, the two largest American generations in history, are both approaching life stages that typically motivate people to buy a home: marriage, children, retirement, and becoming empty nesters. However as of now this trend is not happening, which can be attributed to

ECONOMIC OVERVIEW

multiple reasons. First millennials are a generation that pushes major life events such as children and marriage back, which currently allows them to stay in apartments. Babyboomer’s

Q3 2017

GROWTH

who became empty nesters have a hard time finding sufficient

UNEMPLOYMENT RATE

3.8%

- 13.6%

inventory to downsize. That causes housing prices to stay

POPULATION GROWTH

1,952,630

+ 1.81%

MEDIAN HOUSEHOLD INCOME

57,958

+ 3.99%

LABOR FORCE

845,000

+ 3.29%

high, and makes starter homes for millennials unaffordable. The largest apartment development in Broward County is the 420-unit luxury garden-style apartment community by Atlantic Pacific. The project is scheduled for delivery for November of

CHANGE AS PER YEAR-TO-DATE | SOURCE: US DEPARTMENT OF LABOR STATISTICS

this year. The project is located between Turnpike and I-95 and is offering its residents short commutes to major employment centers in downtown Ft. Lauderdale and Pompano Beach business districts. The community includes a state of the art fitness center, a club house with movie theater, club room with billiards and bar area, executive business center, and resort-style swimming pool with outdoor lounge and summer kitchen. With the development, Atlantic Pacific tried to create

AVERAGE ASKING RENTS TRENDS EFFECTIVE RENTS

SOURCE: COSTAR PROPERTY®

a community for all age groups, which are looking for a blend of luxury, location and affordability. Other major projects

1,470.00

are located all throughout Broward county focusing on Ft.

1,460.00

Lauderdale, Hollywood, Hallandale Beach and Dania Beach. Developments range from luxury garden-style communities on large tracts of land to urban high-rise mixed-use buildings.

1,450.00 1,440.00 1,430.00

LEASING ACTIVITY Broward’s rental market shows first signs of saturation as average rental rates dropped by 0.74% to $1,453 per unit.

ONE COMMERCIAL REAL ESTATE | BROWARD | APARTMENT | Q3 2017

1,420.00 1,410.00 1,400.00

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

3


SALES ACTIVITY

PRICE TRENDS

Investment sales in Broward dropped by 75% compared to the last quarter. Part of the reason is the 2nd quarter marked a record high of $1.7 billion in sales. Investors are becoming more cautious in buying apartments, as cap-rates are becoming tighter and a tread of oversupply.

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

CAP RATE

$/UNIT

SOURCE: REAL CAPITAL ANALYTICS

250,000

6.75%

230,000 210,000

6.25%

190,000 170,000

5.75%

150,000 130,000

5.25%

110,000

TPF Equity REIT sold its 512-unit apartment complex

90,000

Solano at Miramar for a total of $199 million equating to

70,000

$233,886 per unit to Atlanta based Pollack Shores Real

4.75%

50,000

4.25% Q1 2015

Estate. The Solano last traded for $124.25 million in 2007,

Q3 2015

Q1 2016

Q3 2016

Q1 2017

Q3 2017

the same year it was built. That was also near the height of the last real estate boom, just before property values plummeted. Solano totals 685,389 square feet on 22.7 acres. The deal also included a 7.35-acre site on the rear of the property that has a parking lot, a walking path, and power transmission lines.

TRANSACTION VOLUME GARDEN STYLE

MID/HIGHRISE

SOURCE: REAL CAPITAL ANALYTICS

$1.80 BN

Fairfield Residential sold it’s 488 apartment community The Delray Verana Apartments to Bainbridge Cos. For $102.5 million equating to $210,041 per unit. There are significant renovations planned for the property, including an gut renovation and expansion of the clubhouse/leasing center, a makeover of the pool areas, a renovation of the fitness center, the addition or walking paths around the lake, new entry gates, new roof systems, new paint, and upgrades to kitchens and bathrooms.

$1.60 BN $1.40 BN $1.20 BN $1.00 BN $.80 BN $.60 BN $.40 BN $.20 BN $.00 BN Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017

INVESTMENT SALES | LANDLORD REPRESENTATION | TENANT REPRESENTATION | ASSET MANAGEMENT | PROJECT MANAGEMENT

ONE COMMERCIAL REAL ESTATE | BROWARD | APARTMENT | Q3 2017

4


APARTMENT STATISTICS SUBMARKET

TOTAL INVENTORY (UNITS)

VACANCY (%)

YTD NET ABSORBTION

YTD DELIVERIES

UNDER CONSTRUCTION

EFFECTIVE RENTS

Coral Springs

19,281

6.30%

472

687

389

1,475

Fort Lauderdale

12,675

12.10%

508

1,285

1,615

1,785

Hollywood/Dania Beach

10,192

5.56%

6

-

1,342

1,230

Miramar/Hallandale Beach

3,458

5.27%

(22)

-

608

1,186

Oakland Park/Lauderhill

11,852

4.35%

126

-

606

1,160

Pembroke Pines/West Miramar

10,413

5.88%

597

340

280

1,699

Plantation/Sunrise

16,613

6.89%

208

489

721

1,489

Pompano Beach/Deerfield Beach

11,575

6.05%

167

521

546

1,246

Weston/Davie

6,814

8.74%

261

351

284

1,653

Total

102,873

6.87%

2,323

3,673

6,391

1,454

SOURCE: COSTAR PROPERTY®

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

# UNITS

SALES PRICE $

$/UNIT

SUBMARKET

11700 SW 26 Street

Pollack Shores Real Estate Group

512

119,750,000

233,887

Miramar

1495 & 1505 Spring Harbor Dr

Bainbridge Cos.

488

102,500,000

210,041

Delray Beach

10700 City Center Boulevard

Rockpoint Group

365

87,000,000

238,356

Pembroke Pines

510 Lavers Circle

TRPF Atlantic at East Delray

228

54,330,000

238,289

Delray Beach

4854 Fisherman’s Drive

CASA Partners

268

45,300,000

169,030

Coconut Creek

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

#UNITS

DEVELOPER

SUBMARKET

Morgan on 3rd Ave

2018 | Dec

350

Morgan Group

Fort Lauderdale West

One20Fourth

2018 | Sep

386

Lennar Multifamily Communities

Fort Lauderdale West

Harbor Park

2018 | Dec

310

Wood Partners

Fort Lauderdale East

DaniaLive Marketplace

2018

360

Dev Motwani

Dania Beach

Dania Pointe

2019

352

Calm Properties

Dania Beach

Atlantic Cypress Creek

2017 | Nov

420

Atlantic Pacific

Fort Lauderdale North

Circ Residences

2018

397

PrivCap Cos and Lon Tabachnick

Hollywood

Elan Maison

2018 | Mar

394

Greystar

Davie

Hallandale Artsqure

2018

358

Integra Investment

Hallandale Beach

Hollywood Circle

2017 | Nov

397

Hollywood Circle

Hollywood

ONE COMMERCIAL REAL ESTATE | BROWARD | APARTMENT | Q3 2017

5


STEVEN NOSTRAND President & COO ONE Commercial Real Estate

PALM BEACH

snostrand@onecommercialre.com

JULIAN SCHEEFF Director of Intelligence ONE Commercial Real Estate jscheeff@onecommercialre.com

Western Broward Southwest Ranches Plantation Sunrise Weston Parkland Broward | North End Hillsboro Beach Lighthouse Point Bay Colony Sea Ranch The Landings East Fort Lauderdale Las Olas Isles Harbor Beach Fort Lauderdale Beach

BROWARD COUNTY

Lauderdale-by-the-Sea

Rio Vista Victoria Park & Colee Hammock Sunrise Key Coral Ridge / C.R. Country Club Broward | South End Hollywood Beach Hallandale Beach

MIAMI-DADE

ONE Commercial Real Estate 1000 Brickell Avenue, Suite 500 Miami, FL 33131 305.704.9787

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Market View Q3 2017 | Apartment - Broward  
Advertisement