MARKET REPORT
SOUTH FLORIDA | MULTIFAMILY
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This edition of the One Commercial Market Report examines multifamily in Miami- Dade, Broward, and Palm Beach County.
Daniel de la Vega Chief Executive Officer ONE Commercial Real Estate
Miami-Dade County
Q3 2024 | APARTMENT REPORT
MIAMI APARTMENT MARKET SEES RISING DEMAND
AMID ELEVATED SUPPLY, BUT AFFORDABILITY AND VACANCY CONCERNS PERSIST
EXECUTIVE SUMMARY
Apartment demand in Miami strengthened in the third quarter of 2024, following a rise in newly delivered units in the second quarter. The leaseup of new construction continues apace, however demand continues to trail supply additions on an annualized basis. As absorption continues to catch up to supply additions, vacancies have yet to see any significant contraction and rent growth remains largely muted.
That said, annual apartment absorption is growing by 7,300 units through the fourth quarter of 2024, above the previous five-year average of 6,700 units. While this strengthening in demand is welcomed news, Miami continues to face affordability concerns, a wealthier-yet shrinking population and an elevated supply pipeline. These factors all weigh on multifamily fundamentals in the near term, with annual rent gains remaining at 1.8%, below the long-term average of 3.9% over the last ten years.
Although supply additions reached a peak in the second quarter, construction activity remains elevated with 25,000 units still underway. While new deliveries are expected to moderate going forward, they will remain elevated relative to historical levels, totaling over 1,800 units a quarter through the first half of 2026. This will keep demand in “catch-up” mode over the next year or so, resulting in vacancies of around 6% and moderate rent gains, particularly for luxury properties.
SOURCE: COSTAR
Continued inventory growth in luxury apartments through 2025 will place downward pressure on rent growth as vacancies remain elevated for this market segment. The Downtown Miami Submarket, which is home to around 50% of new construction activity, is facing the bulk of supply pressure and is forecast to see unstabilized vacancies rise to over 9% for 4 & 5 Star product through early 2025.
Although 4 & 5 Star demand growth has strengthened to 10% annually in 2024, this remains below the five-year average annual growth of around 13%. However, 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. Still, elevated luxury supply in the near term will continue to result in flat asking rents for this market segment, while significant concessions remain in-place, with 2 months of free rent becoming the norm across the market.
MARKET REPORT
ABSORPTION, NET DELIVERIES & VACANCY
MARKET ACTIVITY
Transaction activity remains sluggish, totaling $975 million in the last year and well below 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 interest rates and higher costs, particularly for insurance, continue to slow pricing gains and activity.
Over the past few years, transactions of over $100 million have reached double digits, with 12 trades in 2021 and again 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 only 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 ten years or so.
An interest-driven rise in cap rates and softening fundamentals is impacting pricing and institutional demand. Transaction cap rates rose significantly since the second half of 2023, from lows in the mid-4% to 5% range in 2022 to around 6%. Going forward, tight financial conditions will continue to result in slower transaction activity relative to the boom in 2021 and 2022.
MARKET REN PER UNIT & RENT GROWTH
TOP BUYERS PAST 12 MONTHS
OUTLOOK
In defiance of broader South Florida and national trends, Miami’s apartment construction activity has regained steam. Construction starts in the second and third quarters of 2024 have totaled over 7,000 units, more than doubling starts in the prior two quarters, which totaled over 3,000 units.
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS
The vast majority of starts remain underway, with underconstruction units totaling over 25,000, representing the largest supply pipeline in all of Florida and the fifth largest in the country. Deliveries are expected to reach a historical record level in 2024, totaling around 8,000 units, with a similar number expected by 2025. Supply underway represents around 12.5% 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.
Despite moderating over the last year, inflation in South Florida remains elevated after already doubling the national average throughout most of 2023. Significant increases in shelter costs have driven this higher inflation, as the tri-county area has seen home pricing appreciation of over 70% and double-digit apartment rental rate increases since 2020.
Now, as office-using job growth and domestic migration are beginning to cool, housing cost increases are moderating. Shelter costs in South Florida are only growing by 5.8% annually as of June, down from an expansion of over 17% in 2023. Elevated new apartment
11481 NW 41ST ST | THE POINT AT LAKESIDE
Doral, FL 33178
SALE DATE
SALE
Jun 2024
$139.3M ($395.6K/U... 100% 110 Months 352 2013
8400 NW 102ND AVE | PALMERA
Doral, FL 33178
SALE DATE
SALE PRICE LEASED HOLD PERIOD UNITS YEAR
Jun 2024
$134M ($304.6K/Unit) 93%
53 Months 440 2020
BUYER SELLER BROKER SALE TYPE SALE COND
6341-6431 COW PEN RD | COURTYARDS AT MIAMI LAKES
Miami Lakes, FL 33014
SALE DATE
SALE
Oct 2024
$69M ($154K/Unit) 99% 164 Months 448 1974
Pantzer Properties (USA)
AMLI Management Comp... (USA) JLL Investment
Kohlberg Kravis Roberts... (USA) Quarterra (USA) JLL Investment
Bulk/Portfolio Sale,Entity Buy/Member...
Graham Residential (USA)
Village Oaks Associates Ltd (USA) Investment
Ground Lease (Leased Fee),Debt Ass...
1310 W 29TH ST | PLAZA GARDENIA APARTMENTS
Hialeah, FL 33012
SALE DATE
SALE PRICE LEASED HOLD PERIOD UNITS YEAR BUILT
May 2024
$20.9M ($193.1K/Unit) 100% 83 Months 108 1967
BUYER
Vantage Capital Partners (USA) SRE Commercial Group Freshwater Group (USA) SRE Commercial Group Investment
13200 NE 7TH AVE | CARIBBEAN CLUB APARTMENTS
North Miami, FL 33161
SALE DATE
SALE PRICE LEASED HOLD PERIOD UNITS YEAR BUILT
Jun 2024
$11.4M
BUYER SELLER SALE TYPE
Prestige Estates (USA) Oleg Vorobyev (CAN) Investment
supply has helped tame apartment rent growth, specifically for the market’s luxury segment. Additionally, a rise in active for-sale listings and an interest-rate-driven pullback in active buyers has helped stabilize home prices.
Lower inflation is now resulting in positive real wage gains, a welcomed sight after wages lagged inflation in the area from 2022 through 2023. Still, an elevated cost of living is impacting lower-income residents, with around 50% of households in South Florida falling below the ALICE: Asset Limited, Income Constrained, Employed threshold, according to United Way. This has resulted in net domestic out-migration from Miami-Dade over the last few years, as many lower-income residents have left in search of a lower cost of living in central and northern Florida, Georgia, Texas, and the Carolinas.
As we advance, a lack of affordable housing will continue to drive cost pressures in the county, which needs around 116,000 affordable units by 2030, according to a recent study by the University of Florida. While legislation such as the Live Local Act aims to address this housing crisis, which remains a significant headwind for continued household formation, some cities have been pushing back due to its provisions overriding local zoning controls on building height and density.
For now, little affordable housing remains underway, and we have yet to see a significant uptick that meets the anticipated requirement addressed by the University of Florida study on future housing needs.
Broward County
Q3 2024 | APARTMENT REPORT
FORT LAUDERDALE MULTIFAMILY DEMAND PERSISTS
AMID GROWING SUPPLY, BUT LUXURY RENT GROWTH FACES PRESSURE
EXECUTIVE SUMMARY
Fort Lauderdale multifamily demand has strengthened since the second half of 2023, with over 2,300 units absorbed so far this year, well above the five-year quarterly average of around 900 units. This rebound came after a softening in demand in 2022 and resulted in a moderation in vacancy expansion. Annual apartment absorption is now growing by 3,600 units through the fourth quarter of 2024, trending above the five-year annual average of 3,500 units.
While a resurgence in demand has helped stabilize a vacancy expansion, developers are set to add elevated levels of new apartments in the coming year. Fort Lauderdale has the fourth-largest apartment inventory pipeline out of all Florida metros, at 6.5% of existing supply, it is one of the largest supply waves the area has seen since CoStar began tracking the market. 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 2025, 4 & 5 Star unstabilized vacancies are expected to remain around 10%, while 1 & 2 and 3 Star vacancies are set to remain below 7%.
4 & 5 Star demand has expanded by over 7% annually so far in 2024, below five-year average annual growth of 9.0% but above the 3% expansion seen in 2022. 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
SOURCE: COSTAR
4 & 5 Star units, even though this market segment rents at a more than 27% premium over 3 Star units.
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 interest-driven rise in cap rates and softening fundamentals is beginning to impact volume and pricing. Average annual transaction cap rates for 4 & 5 Star properties have risen by over 100 basis points, from 4.0% two years ago to 5.0% as of the fourth quarter of 2024.
MARKET REPORT
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. Despite this slowdown, the market has seen four transactions above $100 million in the last year.
The latest major trade involves the sale of the Marela Apartments, a 368-unit, 4-star property built in 1998 and located in Pembroke Pines. Abacus Capital Group purchased the property from the DWS Group for $110 million or over $298,000/unit. The property was renovated in 2015 and was over 90% occupied at sale. The DWS Group purchased the property in 2021 as part of a portfolio trade for over $121 million at a 4.6% cap rate, representing a value decline of around 10%.
The largest single property trade of the year involved the 4-Star 2023-Built, 315-unit The Ellsworth in Plantation. The Church of Jesus Christ of Latter-Day Saints purchased the property from the developers, Stiles and PGIM Real Estate, for $133 million or over $422,000/unit in June while it was 4.1% vacant. The transaction highlights the premium paid for newly-built assets with limited lease-up risk, as 4 & 5 Star properties in the market have traded at an average price of $320,000/ unit over the last year.
Despite the rapid appreciation in values over the past couple of years, softening fundamentals and higher
ABSORPTION,
MARKET REN PER UNIT & RENT GROWTH
TOP BUYERS PAST 12 MONTHS
interest rates are impacting pricing this year. In fact, average annual transaction cap rates have risen from a three-year low of around 5.2% to 5.9% as of the fourth quarter of 2024. Going forward, higher cap rates, coupled with softening fundamentals, will likely remain a drag on market activity, at least until a more significant loosening of financial conditions occurs.
OUTLOOK
Construction started to accelerate in the first half of 2024, with over 2,800 units breaking ground. This rise in activity stands in contrast with national trends of receding starts.
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS
A pandemic amplified surge in demand has emboldened apartment developers in the area over the past few years. 2021 multifamily construction starts stood at over 5,300 units, almost double the historical annual average of around 3,400 units since 2010. 2022 starts rose even further, with a record of over 6,900 units breaking ground. The vast majority of starts remain underway, with under-construction units totaling around 9,300, representing the fourth-largest supply pipeline in Florida, after Miami, Orlando, and Tampa.
Supply underway represents 6.5% 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 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.
With its higher concentration of finance, professional and business services, and information employment, Fort Lauderdale has a median household income that is 5% above
SOURCE: COSTAR
1301 SW 80TH TER | THE ELLSWORTH
Plantation, FL 33324
SALE DATE
SALE PRICE
LEASED
HOLD PERIOD UNITS
YEAR BUILT
Jun 2024
$133M ($422.2K/Unit) 96%
17 Months
315 2023
120 NE 4TH ST | THE WHITNEY
Fort Lauderdale, FL 33301
SALE DATE
SALE PRICE
LEASED HOLD PERIOD UNITS YEAR BUILT
Jun 2024
$129M ($334.2K/Unit) 98% 77 Months
386 2018
BUYER SELLER
BROKER
SALE TYPE
BUYER SELLER
BROKER
SALE TYPE
SALE COND
250 NW 130TH AVE | MARELA APARTMENTS
Pembroke Pines, FL 33028
SALE DATE
SALE PRICE
LEASED HOLD PERIOD UNITS YEAR BUILT
Sep 2024
$110M ($298.9K/Unit) 93%
37 Months 368 1998 (Renov 2015)
The Church of Jesus Chri... (USA) PGIM, Inc. (USA) +1 CBRE Investment
Kohlberg Kravis Roberts... (USA) Quarterra (USA) JLL Investment
Bulk/Portfolio Sale,Entity Buy/Member...
BUYER SELLER BROKER SALE TYPE
Abacus Capital Group (USA) DWS Group (DEU) Newmark Investment
10720 N PRESERVE WAY | MIRAMAR LAKES APARTMENTS
Miramar, FL 33025
SALE DATE
SALE PRICE
CAP RATE
LEASED
HOLD PERIOD UNITS
YEAR BUILT
May 2024
$100.4M ($292K/Unit)
4.9% (Actual) 96%
100 Months 344 2003
BUYER SELLER
BROKER SALE TYPE SALE COND
Brookfield Properties (USA) Starwood Capital Group (USA) Eastdil Secured, LLC Investment
Bulk/Portfolio Sale,Debt Assumption
3495 N PINEWALK DR | PINEBROOK POINTE
Margate, FL 33063
SALE DATE
SALE PRICE
CAP RATE
LEASED HOLD PERIOD
UNITS
YEAR BUILT
Dec 2023
$93M ($236K/Unit) 5.5% (Actual)
BUYER SELLER
BROKER SALE TYPE
Bar Invest Group (USA)
Blackstone Inc. (USA) CBRE Investment
Miami’s. A tight labor market, with an unemployment rate below the U.S. average, at less than 3%, has driven income gains of over 25% since 2020, above the 18% gains for the U.S. Despite a recent slowdown in job growth, total nonfarm employment in the metro remains over 5% higher than pre-pandemic levels, totaling more than 44,000 additional jobs.
Palm Beach County
Q3 2024 | APARTMENT REPORT
PALM BEACH MULTIFAMILY CONTINUES TO SHOW OPTIMISM, BATTLE AGAINST VACANCIES AND LUXURY CONCESSIONS
EXECUTIVE SUMMARY
Palm Beach multifamily demand continues to grow at a healthy pace, with apartment absorption growing over 3% annually in 2024, relative to 2% 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 since 2023, resulting in a rise in the vacancy rate from a low of 3.7% in 2021 to 9.0% as of the fourth 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 -0.1% after growing at a record pace of 24.0% in 2021.
This moderation in demand comes at a time when developers are set to deliver elevated levels of new apartments. Over 400 units have broken ground so far in 2024, and construction starts remained elevated in 2023, with over 2,500 units breaking ground. New supply additions are expected to peak in 2024, totaling over 4,400 units, following an already elevated pipeline in 2023 totaling over 2,900 units delivered, 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 2025, 4 & 5 Star unstabilized vacancies are expected to rise to over 12%, while 3
SOURCE: COSTAR
Star and 1 & 2 Star vacancies are set to remain below 9% and 7% 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 $866 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 from recent peak levels, with volume totaling just $866 million over the last 12 months. However, annualized activity remains elevated relative to long-term historical levels averaging $321 million in annual sales volume over the last ten years.
The largest trade this year has involved the purchase of the 284-unit, 4-Star, CERU apartments in Boca Raton. The 2022-built property was 20% vacant at sale and was purchased by Ares Management Corp from New Century Companies for $139 million or over $491,000/ unit. The trade highlights continued investor interest in newer/high-quality properties despite still facing some lease-up risk.
Another major trade involves an older, well-leased property that allowed for a debt assumption and has a value-add opportunity. The 488-unit, 3-Star, Axis Delray Beach in Outer Delray Beach, built in 1991, was 5.5% vacant at sale and traded for over $111 million or over $228,000/unit at a 6.25% cap rate. Milestone Group acquired the property from The Bainbridge Companies, which finished a significant improvement plan to unit interiors before the sale. The Buyer, which assumed a $66 million loan, plans to incorporate its own multimillion dollar capital plan focusing on common area amenities, landscaping, and building exteriors.
ABSORPTION,
MARKET REN PER UNIT & RENT GROWTH
Most large trades have been concentrated in large 4 & 5 Star apartment complexes built or renovated in the past 20 years, with pricing adjusting significantly based on lease-up risks. Both of the aforementioned deals stand in contrast to the September 2022 sale of the Manor Broken Sound, a 297-unit multifamily property at 5300-5400 NW Broken Sound Blvd. in Boca Raton. The 4-star property, now re-branded as the Amalta, sold for $194 million or $653,000/unit. The property was completed in February 2022 and was still in lease-up at the time of sale.
Going forward, a slowing economy and elevated interest rates, resulting in a near-term pricing correction, will likely
SUBMARKET SALES TRANSACTIONS PAST 12 MONTHS
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.
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 half of 2024 has seen an uptick in starts totaling over 400 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 2,400.
A pandemic-amplified surge in demand has emboldened apartment developers in the Palm Beach area over the past few years, with elevated deliveries totaling over 2,900 units in 2023. Delivery of new product will remain elevated through 2025, with a record number of units, over 4,400, expected to be delivered in 2024.
Supply underway represents 2.8% of existing inventory, with over 70% of units set to deliver as 4 & 5 Star luxury
1090 QUAYE LAKE CIR | THE QUAYE AT WELLINGTON
Wellington, FL 33411
SALE DATE
SALE PRICE
LEASED HOLD PERIOD UNITS
BUYER
5205 CONGRESS AVE | CERU
Boca Raton, FL 33487
SALE DATE
SALE PRICE
LEASED HOLD
PERIOD UNITS
YEAR BUILT
May 2024
$139.7M ($491.9K/U... 80% 28 Months 284 2022
BUYER SELLER
SALE TYPE
Ares Management Corp (USA)
Mainstreet Capital Partners (USA) +1 Investment
1495 SPRING HARBOR DR | AXIS DELRAY BEACH
Delray Beach, FL 33445
SALE DATE
888 COTTON BAY DR E | TURTLE COVE APARTMENT HOMES
West Palm Beach, FL 33406
SALE DATE
SALE PRICE
CAP RATE LEASED
HOLD PERIOD UNITS YEAR BUILT
May 2024
$107.5M ($242.1K/U... 4.9% (Actual) 95%
93 Months 444 1986 (Renov 2012)
BUYER SELLER BROKER
SALE TYPE
SALE COND
Brookfield Properties (USA)
Starwood Capital Group (USA)
Eastdil Secured, LLC
Investment
Bulk/Portfolio Sale,Debt Assumption
5217 CEDAR LAKE RD | THE RESERVE AT ASHLEY LAKE APA...
Boynton Beach, FL 33437
SALE DATE
May 2024
$102.5M ($232.9K/U... 4.9% (Actual)
SALE COND
Brookfield Properties (USA)
Starwood Capital Group (USA)
Eastdil Secured, LLC Investment
Bulk/Portfolio Sale,Debt Assumption
product. Over 40% of units underway are concentrated within a five-mile 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 13 multifamily developments underway across the market, with more than 100 units each making up over 90% 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 totals 457 units at 201 Clearwater Dr also in Downtown West Palm Beach. The property should deliver in 2024. The third largest development is the 396-unit, The Marc, which should deliver this year as well.
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.
