Despite being one of the nation’s most expensive multifamily markets and a magnet for wealthy domestic migrants, Miami isn’t immune to the broader trends of a supply overhang, and investors are noticing.

After years of growth and development coming out of the pandemic, South Florida’s apartment market is starting to cool. A flood of new construction is creating pressure on rents and making investors second-guess new equity investments, panelists said Thursday at Bisnow’s South Florida Capital Markets Forum.

But developers are still doing what they do best — building — even if the numbers might indicate holding off is a better play.

“You have a flat rent roll, maybe up a little bit, but if you're a developer, you have no renewals to keep your rents high. Everything's a new lease, which means they're trending down,” TruAmerica Multifamily co-Chief Investment Officer Matt Ferrari said onstage at The Gale Miami. “I don't know how they have the confidence to put a shovel in the ground.

“​​I think I'm an eternal optimist, but, like, the data is just in front of you.”

It’s been a tough year for the multifamily sector, where rents have softened across the board amid macroeconomic uncertainty, a slowdown in leasing and a record wave of new construction.

Apartments are the only property type where values have fallen this year — office, industrial, retail and commercial prices are all on the upswing, according to MSCI's Commercial Property Price Index.

Miami-Dade has the most construction activity among 90 major markets, adding 18% to existing inventory, according to Cushman & Wakefield data analyzed by Miami Realtors.

The county has led the nation in multifamily units under construction for at least a year, and as of August, Miami-Dade had more than 23,000 units under construction.

“There may be a pause now,” GTIS Partners Managing Director of Capital Markets Sharon Liss said. “[There’s] a lot of cranes in the sky and a lot of construction, and I think people need to digest what they have before diving back in.”

Fort Lauderdale has 9,797 units under construction, set to add 9% to the existing inventory, and Palm Beach has 3,311 units under construction, adding 5% to the existing inventory, according to the report.

All the new buildings mean concessions like free rent may be on the rise despite strong fundamentals and absorption, PGIM Real Estate Executive Director Shaunak Tanna said.

Miami is among the nation’s most expensive apartment markets, with median rent for a one-bedroom apartment at $2,250, according to an October Zumper report. But the city’s asking rents have decreased by almost 6% over the past year, according to the report.

The risk that rents might not grow high enough to cover rising construction costs has led to equity in the market drying up — a nationwide dynamic driven by passive investors looking for less risk and more guarantee on returns.

GAIA Real Estate CEO Danny Fishman said that when his team evaluates new development projects, the rents they assume are about 8% to 10% lower than what developers expect.

“[They] don't quite make sense for the equity,” Fishman said. “They're still positive. They're not losing money — the equity is losing money. We don't want to do those deals. In our underwriting scenario, they're not making enough money for the equity risk, in our view.”

Many investors would rather buy an apartment than build, with sales volumes up 13% year-over-year. That is a more appealing prospect amid high interest rates, with distressed property sales up 20% year-over-year in the third quarter, Multifamily Dive reported.

There was more hope at the beginning of 2025, when U.S. apartment demand was holding up and supply began to slow down nationwide. Effective rents grew 1.1% in March — the highest reading since June 2023, according to RealPage.

But new developments in the Sun Belt markets, which have led the nation’s multifamily construction for years, are still in the process of leasing up units, putting downward pressure on rents.

Out of the more than 35,000 units under construction in South Florida, only about 21% of the incoming inventory is in the preleasing or lease-up phase, according to a third-quarter construction pipeline report by MMG.

It is also harder to draw new renters in from other properties: Renewal rates are elevated as people increasingly decide to stay put rather than venture out into volatility and uncertainty. That is keeping rents lower than they otherwise might be, panelists said.

“That's definitely deflationary across our portfolio,” Ferrari said. “We're hoping that will turn a corner next year. We used to say survive to ‘25, but it feels like that's been pushed out a year or two.”