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


EXECUTIVE SUMMARY

MARKET TRENDS

POPULATION GROWTH FUELS DEMAND FOR APARTMENT PRODUCT IN PALM BEACH COUNTY

Q3 2017 APARTMENT REPORT

Q3 2017

Q2 2017

FORECAST

8.80%

h

h

904

g

g

CONSTRUCTION

4,840

b

b

COMPLETIONS

1,606

g

g

EFFECTIVE RENTS

1,498

g

g

VACANCY

The Apartment market in Palm Beach currently has a vacancy rate of 8.80 %, which is 20 basis-points lower than last quarter and a positive net absorption of 904 units and 1,606 units

NET ABSORPTION

delivered in the last quarter. Effective Rental rates grew slightly to $1,498 per unit. Which is higher than in Miami-Dade and Broward County. At the moment, there are about 4,840 units under development. Palm Beach offers the best market fundamentals for new development, as rental rates are high and the county still has large tracts of undeveloped land. The economic outlook for RELATIVE TO PRIOR PERIOD | SOURCE: COSTAR PROPERTY®

the region is positive as 2.6% new jobs were added in the last 12-months and population grew by 2.8% in the same period.

OUTLOOK

The development of the Brightline by All Aboard Florida, will make it possible to commute from Downtown West Palm Beach to Central Miami in an hour.

Palm Beach’s growing population is fueling apartment development. As the county still possesses large tracts of undeveloped land, developers are focusing on large rental garden-style communities with high-end amenities. As only 497 units are scheduled for next quarter, vacancies are expected to drop with increasing rental rates.

JOB GROWTH BY INDUSTRY PALM BEACH

US

SOURCE: US DEPARTMENT OF LABOR STATISTICS

INFORMATION FINANCIAL ACTIVITIES TRADE, TRANSPORTATION & UTILITIES -6.0%

-5.0%

-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 OTHER GOVERNMENT CONSTRUCTION LEISURE AND HOSPITALITY EDUCATION AND HEALTH SERVICES PROFESSIONAL & BUSINESS SERVICES

ONE COMMERCIAL REAL ESTATE | PALM BEACH | APARTMENT | Q3 2017

2


MARKET ACTIVITY

COMPLETIONS, ABSORPTION AND VACANCY TRENDS COMPLETIONS

About 1,176 apartment units were absorbed in the past quarter and 1,859 units added to the market. Even though completions where high in the last quarter, vacancies

ABSORBTION

VACANCY

SOURCE: COSTAR PROPERTY®

10.00%

2,000

dropped by 20 basis-points to 8.80%.

9.00%

There are currently 4,840 units under development. Palm

1,500

8.00% 7.00%

Beach’s strong economy with adding 2.6% new jobs in the last 12-Months and the strong population growth (+2.8%)

1,000

6.00%

justify new development. Another factor is the incoming wave

5.00%

of retirees, who are moving to Florida and are drawn by the amenities, lifestyle and relative affordability of Palm Beach.

500

4.00%

Palm Beach County still has large tracts of undeveloped land and loose zoning codes make it easy for developers to build large communities.

3.00% 0

2.00% 1.00%

West Palm Beach is also going to be one of the largest beneficiaries of All Aboard Florida’s Brightline. The passenger

500

0.00%

Q2 2016

train service between downtown stations in Miami, Fort

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Lauderdale and West Palm Beach will transform life in the northernmost city on the rail route. As people refused to live in Palm Beach due to the relative distance to Miami it is now possible to reach Miami’s center in an hour. It is also possible to live in downtown West Palm Beach and go to work in Miami. The largest project under development is the 392-unit garden-

ECONOMIC OVERVIEW

style community Town Southern. The project is developed by The Related Group in Royal Palm Beach and is located on

Q3 2017

GROWTH

UNEMPLOYMENT RATE

3.9%

- 11.4%

projects focusing stronger in multifamily developments. With

POPULATION GROWTH

1,493,750

+ 2.77%

the projects they aim to serve the undersupplied suburban

MEDIAN HOUSEHOLD INCOME

61,683

+ 4.61%

LABOR FORCE

617,500

+ 2.61%

29-acres on the south-side of Southern Boulevard just west of US 441. Recently Related has shifted from condominium

rental market, as it is becoming more difficult to find good suburban development property in South Florida.

LEASING ACTIVITY

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

Rental rates continued to climb in the last quarter to $1,498 per unit, which marked an increase of 0.83%.

AVERAGE ASKING RENTS TRENDS EFFECTIVE RENTS

SOURCE: COSTAR PROPERTY®

1,500.00 1,495.00 1,490.00 1,485.00 1,480.00 1,475.00 1,470.00 1,465.00 1,460.00

Q2 2016

Q3 2016

ONE COMMERCIAL REAL ESTATE | PALM BEACH | APARTMENT | Q3 2017

Q4 2016

Q1 2017

Q2 2017

Q3 2017

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SALES ACTIVITY

PRICE TRENDS

Investment sales in Palm Beach dropped by 49% to the last period to $403 million, which marked a slump after an increase of 350% in the last quarter. The per unit prices in Palm Beach were one of the highest in the county as investors are mainly looking for quality suburban product.

CAP RATE

$/UNIT

SOURCE: REAL CAPITAL ANALYTICS

7.75%

300,000

7.25%

250,000

6.75% 200,000

TRANSACTION HIGHLIGHTS DURING THE LAST QUARTER INCLUDED:

6.25% 5.75%

150,000

5.25% 100,000

The Quaye at Palm Beach Gardens, a green

4.75%

50,000

4.25%

apartment complex built 2 years ago was sold by HG

Q1 2015

Q3 2015

Q1 2016

Q3 2016

Q1 2017

Q3 2017

Management to PGIM Real Estate for $118.35 million. The price for the 340-units equated to $348,088 per unit, which was one of the highest per unit sales in South Florida this year. PGIM was drawn to the development by its extremely high barriers to entry due to the communities center location in Palm Beach Garden combined with its best-in-class amenities and high end finishes.

TRANSACTION VOLUME GARDEN STYLE

MID/HIGHRISE

SOURCE: REAL CAPITAL ANALYTICS

$.90 BN

Boca City Walks was sold by Lennar to Monogram Residential District REIT for $80.5 million. The price for the

$.80 BN $.70 BN $.60 BN

229-unit complex equated to $351,528 per unit. The price was

$.50 BN

so high because downtown Boca Raton has one of the most

$.40 BN

expensive apartment rents in Florida. The deal included a

$.30 BN

provision restricting the buyer from converting the apartments to condos before 2027 as Lennar is one of the largest developer of single-family homes, which limits competition.

$.20 BN $.10 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 | PALM BEACH | APARTMENT | Q3 2017

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APARTMENT STATISTICS SUBMARKET

TOTAL INVENTORY (UNITS)

VACANCY (%)

YTD NET ABSORBTION

YTD DELIVERIES

UNDER CONSTRUCTION

EFFECTIVE RENTS

Belle Glade

1,757

8.48%

5

-

-

713

Boca Raton

12,408

13.38%

829

1,417

180

1,784

Boynton Beach

9,889

6.39%

342

372

1,167

1,401

Delray Beach

4,572

11.07%

155

316

460

1,771

Greenacres

4,006

5.05%

138

118

-

1,086

Outlying Palm Beach County

193

3.58%

6

-

-

662

Palm Beach Gardens/Jupiter

6,397

5.74%

102

-

477

1,604

Royal Palm Beach/Wellington

6,167

8.02%

209

350

637

1,484

West Palm Beach

13,722

8.63%

(278)

99

1,919

1,290

Total

59,111

8.80%

1,508

2,672

4,840

1,498

SOURCE: COSTAR PROPERTY®

SIGNIFICANT SALES TRANSACTIONS PROPERTY ADDRESS

BUYER NAME

# UNITS

SALES PRICE $

$/UNIT

SUBMARKET

10000 S Gardens Drive

PGIM Real Estate

340

118,350,000

348,088

Palm Beach Gardens

33 SE 8 Street

Monogram Resiential Trust

229

80,500,000

351,528

Boca Raton

440 E Ocean Avenue

Bridge Investment Group

291

77,200,000

265,292

Boynton Beach

805 N Olive Avenue

Castle Lanterra Properties

259

63,500,000

245,174

Downtown West Plam Beach

6701 Mallards Cove Road

Northland Investment Corp

359

56,010,000

156,017

Jupiter

MAJOR DEVELOPMENT PIPELINE PROPERTY ADDRESS

COMPLETION

#UNITS

DEVELOPER

SUBMARKET

The Park-Line

2018

254

Florida East Coast Industries, Inc.

West Palm Beach

Town Southern

2018

392

The Related Group of Florida

Wellington

Catalina at Alton

2018

353

FCI Residential Corporation

Palm Beach Gardens

500 OCEAN Luxury Apartment Homes

2018

341

LeCesse Development Corporation

Boynton Beach

The Tower at MorseLife

2018

317

MorseLife, Inc.

West Palm Beach

Broadstone City Center

2018

315

Alliance Residential, LLC

West Palm Beach

The District Boynton - Phase II

2017

350

Ram Realty Services

Boynton Beach

CityPlace Apartments

2018

300

Related Group Of Florida, The

West Palm Beach

Delray Station

2017

284

Wood Partners

Delray Beach

214 S Rosemary Ave

2018

275

All Aboard Florida

West Palm Beach

ONE COMMERCIAL REAL ESTATE | PALM BEACH | APARTMENT | Q3 2017

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STEVEN NOSTRAND President & COO ONE Commercial Real Estate snostrand@onecommercialre.com

BROWARD

JULIAN SCHEEFF Director of Intelligence ONE Commercial Real Estate jscheeff@onecommercialre.com Miami | North End Aventura Golden Beach Bal Harbour Surfside Sunny Isles The Islands Bay Harbor Islands Indian Creek Normandy Isles La Gorce Sunset Islands Venetian Islands Fisher Island Key Biscayne Miami Beach South Beach Mid Beach North Beach Downtown Miami Midtown Edgewater Downtown Miami

MIAMI-DADE COUNTY

Palm/Hibiscus/Star Islands

Brickell Western Miami Doral Miami | South End Coconut Grove Coral Gables Pinecrest Palmetto Bay CocoPlum Gables Estates Snapper Creek Lakes Ponce-Davis & High Pines Old Cutler Bay Deering Bay

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 - Palm Beach  
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