MARKET REPORT
SOUTH FLORIDA | MULTIFAMILY
A BOUTIQUE BROKERAGE WITH INSTITUTIONAL QUALITY SUPPORT
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The commercial real estate landscape has changed. Florida is impacted by global economic and political events more than most. Capital is forming new markets, redefining old ones, and continues to shape the fabric of our ever-growing landscape. Understanding these changes allows us to continue serving our clients and communities. By embracing the data and analytics we can identify movements, address obstacles, forecast challenges, and secure a vision for the future.
This edition of the ONE Commercial Market Report examines the multifamily markets in Miami-Dade, Broward, and Palm Beach counties.
Daniel de la Vega Chief Executive Officer ONE Commercial Real Estate
Miami-Dade County
Q2 2024 | APARTMENT REPORT
RECORD DELIVERIES FORECASTED FOR MIAMI
MULTIFAMILY. LUXURY SEGMENT FACES VACANCY SURGE, YET RENTER PREFERENCES PERSIST.
EXECUTIVE SUMMARY
Miami’s multifamily growth has slowed over the last 12 months relative to recent elevated levels, with annual apartment absorption growing by 6,600 units through the second quarter of 2024, trending below the previous five-year annual average. Affordability concerns, along with a shrinking population and an elevated supply pipeline weigh on multifamily fundamentals in the near term, with annual rent gains slowing to 2.1% from a high of 16.2% in 2022.
Slowing demand comes at a time when developers are set to deliver elevated levels of new apartments. Despite annual starts slowing to just over 7,500 units in 2023, 2022 set a record with 15,400 units underway, after an already elevated level in 2021 totaling 11,000 units. After over 6,700 units delivered in 2023, additions to supply are set to rise higher in 2024, totaling around 8,300 units, surpassing 2020 record levels.
Continued inventory growth in luxury apartments through 2025 will place downward pressure on rent growth as vacancies expand for this market segment. By the end of 2024, 4 & 5 Star unstabilized vacancies are expected to rise to 9%, while 1 to 3 Star vacancies are set to remain below 5%. The Downtown Miami Submarket, which is home to 40% of new construction activity, is facing the bulk of supply pressure and is forecast to see unstabilized vacancies rise to 10% for 4 & 5 Star product through the end of 2024.
SOURCE: COSTAR
Although 4 & 5 Star demand growth slowed to 8% annually through the first quarter of 2024, well below the five-year average annual growth of 14%, long-term trends continue to highlight a growing renter preference towards newer luxury units. Over the last decade, 90% of demand growth has been concentrated in 4 & 5 Star units, even though this market segment rents at a more than 35% premium over 3 Star units.
Sales volume over the last 12 months totaled $1.1 billion with activity moderating from record levels in 2021 and 2022 totaling $4 billion annually. Still, over a longer time horizon, annual sales volume has remained in line with the ten-year average of $1.7 billion. These trends highlight continued investor interest, with institutional buyers remaining active over the past year.
MARKET REPORT
ABSORPTION, NET DELIVERIES & VACANCY
MARKET ACTIVITY
Transaction activity reverted back to pre-pandemic norms since 2023, totaling $1.6 billion for the year, as higher interest rates and slowing economic growth impacted investment activity. Despite this, volume remained in line with longer-term trends averaging $1.8 billion annually over the past 10 years. Since 2020, strong tenant demand, resulting in significant rent gains, has attracted outsized investor interest to Miami. Double-digit pricing growth in 2021 and 2022 has underscored investor appetite for multifamily in the area, though higher interest rates, softer rent gains, and higher costs, particularly for insurance, are now slowing pricing gains and activity.
Over the past few years, transactions of over $100 million have reached double digits, with over 13 trades in 2021 and 12 trades in 2022 surpassing this figure. This was up from an average of around two of these transactions a year from 2015 to 2020. In the last couple of years, seven transactions have exceeded $200 million, unprecedented before 2021, though 2023 saw one transaction at over $270 million and only two transactions of over $100 million. These trades have been concentrated in large 4 & 5 Star apartment complexes that have been built or renovated in the last eight years.
Four of these trades occurred in the downtown Miami, Wynwood, and Miami Beach areas, and one each in Coral Gables, South Miami, and Doral. Due to their location and age, these assets have traded at a premium of over
MARKET REN PER UNIT & RENT GROWTH
TOP BUYERS PAST 12 MONTHS
$550,000/unit on average, well above average pricing for 4 & 5 Star assets of just over $400,000/unit over the past four quarters. Virtually all trade activity for deals above $100 million has involved institutional and private equity players, with public and private REIT buyers making up an increasing share since 2021.
Despite continued investor interest, an interest-driven rise in cap rates and softening fundamentals is impacting
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS
pricing. Transaction cap rates rose significantly in the second half of 2023, from lows in the mid-4% to 5% range in 2022 to the mid-6 % range. Still, institutional investors have remained a significant share of buyer activity over the last year. Going forward, tight financial conditions will continue to result in slower transaction activity relative to the boom in 2021 and 2022. Additionally, pricing growth will remain muted as softening rent growth and higher costs, specifically for insurance, impact value creation.
OUTLOOK
Higher financing costs and a slowing economic environment are beginning to impact development with construction starts receding in 2023, after peaking in late 2022. Still, annual starts for 2023 totaled over 8,400 units, above pre-pandemic figures averaging over 6,600 units from 2015 through 2019. A pandemic amplified surge in demand has emboldened apartment developers in the Miami area over the last three years. 2021 starts of over 12,000 units almost doubled the historical annual average and 2022 starts rose even further, reaching a record of over 15,900 units.
8255
Doral, FL 33126
SALE
11481 NW 41ST ST | THE POINT AT LAKESIDE
Doral, FL 33178
Bayshore Global Manage... (USA) +1 Dragon Global Miami Rea... (USA) +1 Investment Deed Restriction,Debt Assumption Oct 2023
$135M ($544.4K/Unit) 41% 9 Months 248 2023
7004
SW
40TH ST | WINDSOR AT LUDLAM TRAIL
SALE DATE
SALE
RATE
SALE DATE
SALE PRICE CAP RATE
Jul 2023
$91.4M ($292.8K/Unit) 4.5% (Actual) 92%
Oct 2023
$29.3M ($213.9K/Unit) 5.5% (Actual) 100% 51 Months
SALE TYPE
LEASED HOLD PERIOD UNITS YEAR BUILT
SALE COND
Miami, FL 33155 SOURCE:
GID Investment Advisors... (USA) Altman Management Com... (USA) +2 Cushman & Wakefield Investment Debt Assumption
1968 Xavier Perez (USA)
RCN Realty LLC
Lisa Ramos (USA) +1
Skyrise Commercial RE Advisors Investment Redevelopment Project
The vast majority of starts remain underway, with under construction units totaling over 22,000, representing the largest supply pipeline in all of Florida and the ninth largest in the country. Deliveries are expected to reach a historical record level in 2024, totaling over 9,500 units, with a further 8,700 units expected by 2026.
Supply underway represents around 11.7% of existing inventory with over 90% set to deliver as 4 & 5 Star luxury units. Over 65% of units underway are concentrated in the area between I-95 and the Atlantic Ocean, with the majority, over 40%, located between downtown Miami and the reinvigorated Wynwood area. Following national trends, new development is occurring in areas with a significant and growing share of neighborhood amenities, which include proximity to beach access and new or updated retail establishments.
Employment gains are set to drive household formation and income growth over the coming years, resulting in a continued rise in housing demand, though these have slowed over the last year. Slower demand and an increase in competitive supply delivering in close proximity is resulting in longer lease-up periods along with increased concessions. These incentives will likely have to remain in place well into 2026 as new deliveries begin to wane thereafter.
Still, homeownership has been impacted by higher insurance premiums, rising maintenance costs in older condo properties and a pandemic induced surge in home values, making renting more attractive. The limited construction of single family housing across South Florida, coupled with elevated mortgage rates further impact home affordability, helping drive housing demand towards new luxury apartments and garden style rental developments.
Broward County
Q2 2024 | APARTMENT REPORT
FORT LAUDERDALE FACES LARGEST APARTMENT
INVENTORY WAVE ON RECORD
EXECUTIVE SUMMARY
Fort Lauderdale multifamily demand has strengthened in the first quarter of 2024, with over 1,500 units absorbed, well above the five-year quarterly average of around 900 units. This rebound came after a softening in demand since 2022 and resulted in absorption outpacing new supply for the first time in the last year. Annual apartment absorption is now growing by 3,800 units through the third quarter of 2024, trending above the five-year annual average of 3,400 units.
While a resurgence in demand has helped stabilize a vacancy expansion that has been taking shape since 2021, developers are set to add elevated levels of new apartments in the coming year. As of the first quarter of 2024, Fort Lauderdale has the fourthlargest apartment inventory pipeline out of all Florida metros, at 7.5% of existing supply, the largest supply wave the area has experienced on record. Continued inventory growth in luxury apartments through 2025 will place downward pressure on rent growth as vacancies expand for this segment of the market. Through the end of 2024, 4 & 5 Star unstabilized vacancies are expected to remain around 9%, while 1 & 2 and 3 Star vacancies are set to remain below 7%.
4 & 5 Star demand has expanded by 9.1% annually in the fourth quarter of 2023, in line with the fiveyear average annual growth of 9.0%. This follows long-term trends indicating a growing renter preference towards newer luxury units. Over the past decade, around 90% of demand growth has been concentrated in 4 & 5 Star units, even though this market segment rents at a more than 27% premium over 3 Star units.
SOURCE: COSTAR
The mismatch between affordable housing supply and demand is expected to lead to rent growth outperformance for 1 to 3-star units through the near-term forecast period. Additionally, submarkets with lower asking rents, such as Oakland Park/ Lauderhill, Hollywood/Dania Beach, and Pompano Beach/ Deerfield Beach, have witnessed strong annual rent gains in the past few quarters as renters continue to seek more affordable geographies.
On the other hand, market participants have noted a rise in luxury apartment concessions to compete with newly delivered products. Several properties now offer up to two months of free rent, softening luxury effective rent gains.Sales over the past 12 months total $1.4 billion, below the five-year historical average of $2.5 billion. Despite elevated investor interest, an interestdriven rise in cap rates and softening fundamentals is beginning to impact pricing. Average annual transaction cap rates for 4 & 5 Star properties have risen by around 100 basis points, from around 3.8% two years ago to 5.0% as of the third quarter of 2024. Additionally, pricing uncertainty, coupled with a slowing economy and higher financing costs, is weighing on transaction volume and size, with institutional buyers remaining on the sidelines.
MARKET REPORT
MARKET ACTIVITY
Transaction activity has slowed, with volume totaling $1.4 billion over the past 12 months, below pre-pandemic totals averaging $1.8 billion annually from 2015 through 2019. After reaching double digits in 2021 and 2022, transactions of over $100 million have been rare in 2023, with only one trade above this figure. In the past couple of years, five transactions have exceeded $200 million, a rare occurrence before 2021. These trades have been concentrated in 4 & 5 Star apartment complexes with more than 400 units that have been built or renovated since 2000. Despite this longterm trend, the majority of deals since the second half of 2023 have concentrated in small 2 to 3-star assets with deal sizes of less than $10 million.
That said, two large trades for over $50 million have occurred in 2024. These involved the sale of Nine Hollywood and The Queue in March and April, respectively. The sale of the 204-unit, 4-Star, Nine Hollywood represents the largest transaction of the year, totaling $62 million or over $303,000/unit. The newly delivered property was acquired by crowdfunding REIT FundRebel before leasing had commenced, indicating continued investor demand for unstabilized multifamily properties in the area. In comparison, the sale of the 191-unit, 4-Star, the Queue, involved a stabilized property that traded for over $58 million or over $308,000/unit and included a debt assumption. The transaction involving Lurra Capital as a foreign buyer, assuming $33.2 million in debt from the seller Boardwalk
MARKET REN PER UNIT & RENT GROWTH
TOP BUYERS PAST 12 MONTHS
Properties, indicates a slight premium for stabilized assets with assumable loans.
Increased borrowing costs have resulted in an uptick in sales involving debt assumptions in the market, making up over 20% of volume in 2023, up from an average of around 9% in the past five years. Three of the eight sales involving trades for over $50 million in 2023 have included debt assumptions. These include the largest trade so far, which occurred in June 2023. The trade involved the acquisition of the Villas at Wyndham Lakes for $121 million, or over $360,000/unit, by The Connor Group. The buyer assumed a loan for $51 million and then consolidated that into a new loan with an additional
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS
$27 million. Another significant debt assumption involved the Riverland Apartments in Melrose Manors. The 4 Star midrise apartments built in 2021 traded for $84 million, or over $304,000/unit, in February 2023. The Shidler Group sold the property to Stratford Management at a 22% discount relative to its acquisition price in March 2022 of over $108 million. The buyer assumed a loan with a $55.9 million remaining balance from First Republic Bank.
OUTLOOK
Construction starts accelerated in the first quarter of 2024, with over 1,300 units breaking ground. This marks the third straight quarter of rising activity, which stands in contrast with national trends of receding starts. A pandemic amplified surge in demand has emboldened apartment developers in the area over the past two years. 2021 multifamily construction starts at over 5,500 units, almost double the historical annual average of around 3,400 units since 2010. 2022 starts rose even further, with a record of over 7,000 units breaking ground. The vast majority of starts remain underway, with under-construction units totaling around 10,000, representing the fourth-largest supply pipeline in Florida, after Miami, Orlando, and Tampa.
Supply underway represents 7.5% of existing inventory, with around 80% set to deliver as 4 & 5 Star luxury units. Around 60% of units underway are concentrated in the area between I-95 and the Atlantic Ocean, with the majority, at 59%, located
SOURCE: COSTAR
1301 SW 80TH TER | THE ELLSWORTH
Plantation, FL 33324
SALE DATE
SALE PRICE
Jun 2024
$133M ($422.2K/Unit) 100%
17 Months 315 2023
10720
N
Property Reserve, Inc. (USA) PGIM, Inc. (USA) +1 Investment
PRESERVE WAY | MIRAMAR LAKES APARTMENTS
Miramar, FL 33025
SALE DATE
SALE PRICE CAP RATE
May 2024
$99.1M ($287.9K/Unit) 4.9% (Actual) 96% 20+ Years 344
3495 N PINEWALK DR | PINEBROOK POINTE
Margate, FL 33063
SALE DATE
SALE PRICE
CAP RATE LEASED HOLD PERIOD UNITS
Dec 2023
$93M ($236K/Unit) 5.5% (Actual) 95%
79 Months 394
BUILT
Brookfield Properties (USA) Starwood Capital Group (USA) Investment
Bulk/Portfolio Sale,Debt Assumption
SALE TYPE 1988 Bar Invest Group (USA) Blackstone Inc. (USA) CBRE Investment
3001 NW 130TH TER | THE RETREAT AT SAWGRASS VILLAGE
Sunrise, FL 33323
SALE DATE
SALE
BUILT
Jun 2024
$89.4M ($275.1K/Unit) 100%
113 Months 325 2015
10900 W 17TH ST | THE ATLANTIC PRESERVE
Plantation, FL 33322
SALE DATE
SALE PRICE LEASED HOLD PERIOD UNITS
YEAR BUILT
Jul 2023
$86M ($293.5K/Unit) 93%
43 Months
293 1989
BUYER SELLER
SALE TYPE
Mesirow Financial (USA) AMLI Management Comp... (USA) Investment
Atlantic | Pacific Compani... (USA) +1 PGIM, Inc. (USA) Investment
SOURCE:
between the Central Fort Lauderdale, Hollywood/Dania Beach, and Pompano Beach/Deerfield Beach submarkets. Over 30% of 4 & 5 Star units delivered since 2015 and currently underway are concentrated within a 3-mile radius of Las Olas Boulevard, a major shopping, dining, and entertainment destination. Following national trends, new development is occurring in areas with a significant and growing share of neighborhood amenities, which include proximity to beach access and new or updated retail establishments.
Despite slowing employment and population growth, homeownership has been impacted by higher insurance premiums, rising maintenance costs in older condo properties, and a pandemic-induced surge in home values, making renting more attractive. The limited construction of single-family housing across South Florida and elevated mortgage rates further impact home affordability, helping drive demand toward new luxury apartments and garden-style rental developments. That said, over 5,500 units were delivered in 2023, and a further 4,500 are expected to be delivered in 2024, outpacing historical and forecast demand formation respectively.
Palm Beach County
Q2 2024 | APARTMENT REPORT
PALM BEACH MULTIFAMILY SEES ROBUST DEMAND DESPITE SLOWING GROWTH TRENDS
EXECUTIVE SUMMARY
Palm Beach multifamily demand continues to grow at a healthy pace, with apartment absorption growing over 3% annually through the first quarter of 2024, relative to 1.8% growth for the U.S. Still, following national trends, demand has slowed from peak levels of over 8% annual growth seen in the third quarter of 2021. Additionally, delivery of new apartment units has outpaced absorption in 2023, resulting in a rise in the vacancy rate from a low of 3.7% in 2021 to 9.0% as of the third quarter of 2024. Affordability concerns, along with slowing population growth and an elevated supply pipeline, are weighing on multifamily fundamentals in the near term, with annual asking rent gains continuing their descent, now slowing to 0.2% after growing at a record pace of 25.6% in 2021.
This moderation in demand comes at a time when developers are set to deliver elevated levels of new apartments. Over 700 units have broken ground so far in 2024 and construction starts remained elevated in 2023, with over 2,900 units breaking ground, above the ten-year historical average of 2,600 units. New supply additions are expected to remain elevated over the next two years, following an already elevated pipeline of 2023 deliveries totaling over 2,900 units, above the five-year historical average of 2,300 units.
Continued inventory growth in luxury apartments through 2025 will place downward pressure on rent growth as vacancies expand for this segment of the market. By the end of 2024, 4 & 5 Star unstabilized vacancies are expected to rise to over 10%, while 3
SOURCE: COSTAR
Star and 1 & 2 Star vacancies are set to remain below 9% and 6% respectively.
The rise in luxury apartment deliveries is pushing managers to offer increased concessions in order to compete for a limited demand pool, with several newly delivered properties offering up to two months of free rent, softening luxury rent gains. Despite this near-term headwind, higher financing costs are beginning to slow development activity, which will likely limit supply growth past 2026, allowing vacancies to come down from elevated levels in the longer term.
Sales volume over the last 12 months totals $863 million, below the five-year historical average of $1.4 billion. Despite elevated investor interest, an interest rate-driven rise in cap rates and softening fundamentals are beginning to impact pricing. Average annual transaction cap rates for transactions larger than $5 million have risen from the 4% range to the mid-5% range since 2023. Going forward, higher costs, specifically for insurance, along with softer rent gains and elevated interest rates, will continue to impact activity and pricing. Still, institutional investors have made up a larger share of buyers over the last year relative to the prior five-year average, indicating an elevated interest in the market.
MARKET REPORT
Transaction activity has slowed, with volume totaling just $863 million over the last 12 months. Since 2020, strong tenant demand resulting in significant rent gains has attracted outsized investor interest in Palm Beach. Double-digit pricing growth in 2021 and 2022 has underscored investor appetite for multifamily in the area, though softer fundamentals and rising interest rates are now slowing pricing gains and transaction activity.
Despite annualized activity remaining elevated relative to long-term historical levels averaging $331 million in annual sales volume over the last ten years, the total number of trades has dropped significantly. Additionally, pricing has begun to contract, with average annual transaction pricing falling to $260,000/unit from $260,000/unit last year.
Since 2020, transactions of over $100 million have reached double digits, with 11 trades in 2021 and six in 2022 surpassing this figure. This was up from an average of one of these transactions a year from 2016 to 2020. Two transactions have exceeded $200 million in the last couple of years, unprecedented before 2021. As activity has moderated, only two transactions of over $100 million have occurred since 2023.
2024 started off strong with one large transaction for over $83 million, driving 60% of volume for the year. The sale involved the Cottonwood West Palm, a 4-star, 245-
TOP BUYERS PAST 12 MONTHS
unit apartment complex built in 2018 and 94% occupied at sale. Pantzer Properties purchased the property for over $340,000/unit from Cottonwood Communities in February. Pantzer Properties secured a loan with CBRE Capital Markets for the purchase, totaling over $50 million.
The bulk of activity in the market has been composed of 4 & 5 Star assets, with over $4 Billion in luxury properties trading hands since 2020, representing over 65% of transaction volume. Despite this long-term trend, most deals since the second half of 2023 have concentrated in small 2 to 3-Star assets with deal sizes of less than $15 million.
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS
Going forward, a slowing economy and higher interest rates, resulting in a near-term pricing correction, will likely continue to drive slower transaction activity relative to the boom in 2021 and 2022. Average transaction cap rates have risen from the low 5% range in 2022 to over 6% since 2023, impacting valuations. Higher cap rates coupled with softening fundamentals will likely remain a drag to market activity until financial conditions eventually loosen.
OUTLOOK
After hitting elevated levels in the first quarter of 2023, with over 1,500 units added to the pipeline, construction starts have moderated. Still, the first quarter of 2024 has seen an uptick in starts totaling over 700 units. A slowing economic environment coupled with higher financing costs are beginning to impact development activity, with quarterly starts returning to long-term average levels of around 650 units over the last ten years. Still, total under-construction units remain elevated at over 4,600.
A pandemic-amplified surge in demand has emboldened apartment developers in the Palm Beach area over the past few years, with elevated deliveries
5205 CONGRESS AVE | CERU
Boca Raton, FL 33487
SALE DATE
SALE PRICE LEASED
HOLD PERIOD UNITS
$139.7M ($491.9K/U...
Management Corp (USA)
1495 SPRING HARBOR DR | AXIS DELRAY BEACH
Delray Beach, FL 33445
SALE DATE
SALE PRICE
HOLD PERIOD UNITS
BUILT
Jun 2024
$111.6M ($228.8K/U...
Milestone Group (USA) The Bainbridge Companies (USA) Investment
888 COTTON BAY DR E | TURTLE COVE APARTMENT HOMES
West Palm Beach, FL 33406
SALE DATE SALE PRICE
(Renov 2012)
Properties (USA)
5217 CEDAR LAKE RD | THE RESERVE AT ASHLEY LAKE APA...
Boynton Beach, FL 33437
SALE DATE
SALE PRICE CAP RAATE
HOLD PERIOD UNITS
$106.7M ($242.5K/U...
Bulk/Portfolio Sale,Debt Assumption May 2024
Brookfield Properties (USA) Starwood Capital Group (USA)
2750 RIO VISTA BLVD | AVANA PALM BEACH GARDENS
Palm Beach Gardens, FL 33410
SALE DATE
SALE
$92.2M ($205.7K/Unit)
Greystar Real Estate Part... (USA) PGIM, Inc. (USA) +1 Investment Bulk/Portfolio Sale Jul 2023
SOURCE:
totaling over 2,900 units in 2023. Delivery of new product is likely to remain elevated through 2025, with a record number of units, over 3,700, expected to be delivered in 2024.
Supply underway represents 5.7% of existing inventory, with over 70% of units set to deliver as 4 & 5 Star luxury product. Over 40% of units underway are concentrated within a fivemile radius of Downtown West Palm Beach, which is seeing significant new development, specifically near The Square, an experiential neighborhood by the Related Companies. Following national trends, new development is occurring in areas with a significant and growing share of neighborhood amenities, which include proximity to beach access and new or updated retail establishments.
Currently, there are 12 multifamily developments underway across the market, with more than 300 units each, making up over 70% of units underway. The largest development is Savio, which totals 747 units and is set to deliver in two phases, with the first phase expected to arrive in 2025 in Delray Beach. The second largest development includes 459 units at 350 S Australian Ave in the Downtown West Palm Beach Submarket. The 4 Star apartment project is expected to be delivered in late 2024. The third largest development totals 457 units at 201 Clearwater Dr also in Downtown West Palm Beach. The property should deliver in 2024.
Despite elevated apartment deliveries in the near term, healthy employment gains driving household formation and income growth over the coming years should result in a continued rise in housing demand. A near-term slowdown in construction starts points to a weaker supply pipeline post-2025, which should help rebalance supply and demand in the longer term. Additionally, homeownership has been impacted by higher insurance premiums, rising maintenance costs in older condo properties, and a pandemic-induced surge in home values, making renting more attractive. Still, net absorption has continued to trail behind new deliveries for most of the last two years. Going forward, demand is expected to moderate to pre-pandemic norms, with elevated supply resulting in subdued rent gains.
