While most markets set records for rent and occupancy performance in 2021 and 2022, Miami led them all in net effective rent during one of the strongest periods in the history of our industry. However, as demand has cooled nationwide, the south Florida MSA’s rent and occupancy performance has also cooled. As of mid-June, Miami’s rent and occupancy performance has fallen into negative territory on a year-over-year basis. Despite traffic and new leases signed sitting above the national average and growing, significant new supply and the vast run-up in rents have made it hard for landlords to push rents in recent months. Job growth is steady, migration will continue, and Miami will remain a central location for international investment. While there may be volatility in the short term, Miami remains an attractive market over the next five years. Looking further into the future, environmental challenges and the subsequent expenses will likely make investment difficult, especially compared to other inland markets to the north and west of Miami. Moreso than most markets, Miami has unique headwinds and tailwinds providing both opportunities and challenges for multifamily investors and operators.
Traffic and Leasing
The Miami metro is averaging 10.3 tours per property per week and 3.2 leases signed per week, according to Radix data. Both figures meaningfully outpace the national average.
The Downtown Miami submarket, inclusive of Little Havana and Wynwood, leads the metro with nearly 15 tours per property per week.
Boca Raton West is also seeing significant traffic, as the average property logs more than 14 tours per week. Not only is it the second highest submarket for overall traffic, but it is among the fastest growing traffic submarkets, as well. Compared to last year, Boca Raton West has picked up about 3.5 tours per property per week.
Traffic isn’t high across the metro, however, as the Dade County submarkets are averaging less than 5 tours per property.
On the leasing side, the strongest submarkets are Kendall Lakes/Hammond, where the average property is signing 5.5 new leases per week, and West Palm Beach/Palm Beach, where properties average 4.8 new leases each week. Both submarkets are averaging around 11 tours per property, giving them conversion ratios well above 40%. Kendall Lakes/Hammond has also seen the largest annual increase in leasing. Compared to this time a year ago, properties are averaging 2.6 additional new leases.
Market occupancy in Miami is 94.7%, and while that puts Miami in the top 10 nationwide for occupancy, it still reflects a meaningful decline from last year’s June occupancy rate of 95.4%.
The increase in leasing activity is having a direct impact on occupancy in West Palm Beach/Palm Beach, with occupancy in the submarket up 1.4% over the past 12 months. It leads the market in occupancy growth and is one of only four submarkets in which occupancy is higher than it was a year ago.
The average apartment in Miami has 17 units available to rent in the next 60 days, just under the national average of 18 units available.
While North and South Dade county has some of the weakest traffic, their apartments are well occupied, and lead the MSA in both occupancy and ATR.
The average net effective rent in Miami is $2,602, among the highest in the nation. While Miami has been the most expensive metro in Florida for some time, its meteoric growth combined with relatively meager rent increases in gateway markets, has made Miami one of the most expensive cities from a cost of living perspective.
Over the past year, rents are down across the metro; likely a result of how fast and how much rents have grown from the year prior.
Despite the overall decline in rents, Pompano Beach has performed very well, as rents have increased 13.4% over the past 12 months. South Dade County, North Miami Beach and Boca Raton have also seen steady annual rent increases.
Concessions are mostly flat across the metro, although some submarkets like Kendall East/Coral Gables and Fort Lauderdale have seen concessions increase over the past month.
Rent growth will be steady moving forward as continued migration bolsters demand in South Florida. However, the mass migration during COVID is over, and in place renters are unlikely to pay significant rent increases. New residents in Miami did not flinch at high rents a few years ago, especially if they were coming from expensive markets in the Northeast, but those days are behind us, and it will be difficult for property managers to drive new or renewal rents for many residents.
The South Florida new supply pipeline is one of the largest in the nation. Stretching from the southern tip of Florida to north of West Palm Beach, there are more than 900 projects in various stages of development, planning or construction. However, many of these projects have not yet broken ground, and if the multifamily industry continues to cool, some deals will not be built.
Of the more than 900, only 236 are actively under construction, so when looking at the short to intermediate term, Miami does not have the supply pressure that some other sunbelt markets are facing. Yet as demand remains high in Miami, I expect the new supply pipeline to remain full. The potential issue plaguing Miami development is location based. Many people want to live right on the ocean, but the environmental risks will lead to higher insurance costs and higher operating expenses. While this may not be an immediate problem, developers, owners and property managers would be wise to start taking these costs and risks into account now as they underwrite future developments and acquisitions.
Radix ProForma and Radix Research are powerful tools that work together to analyze multifamily real estate markets, like Miami, and portfolios comprehensively. With Radix ProForma, development and acquisition teams can make proactive decisions based on real-time data and historical trends, giving them a crucial advantage in a rapidly changing economic environment.Leveraging Radix Research, stakeholders can benchmark and evaluate the performance of live properties and portfolios at submarket, market, and national levels, accessing a wide range of data analytics that streamline the research process. By using these products together, you can fully understand your current and potential markets to make informed decisions that drive success for your multifamily investments.
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