South Florida's apartment sales have hit a milestone: the highest-ever sales dollar volume for the first nine months of any year on record, states a newly released Q3 Cushman & Wakefield multifamily market report.
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For the first nine months of 2016, multifamily investors paid more than $2.4B for South Florida properties. But the report's author, Cushman & Wakefield's Calum Weaver (who is currently selling 170 units at Valencia Doral condo, here), questions whether the momentum will continue to break records for all of 2016.
“As we enter the last quarter of 2016, it will be interesting to see if 2015's record sale activity of over $3.3B will be broken,” he writes. The reason: new investment opportunities are dwindling. Owners are holding onto assets now and others are just asking for too much.
“It's just that there are so many deals that can trade at any given time,” Calum tells us in a phone interview. “So far, the deals we have on the market, the interest has been strong.”
But Calum notes that investor demand has dropped from foreign buyers, because the dollar is stronger, unless they already have an investment in the US.
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Calum also indicates supply is more than keeping up with demand, despite there being more than 14,000 new apartment units underway.
During the past five years, more than 400,000 new residents moved to South Florida. At the same time, developers delivered 31,000 new units.
“That's one unit for every 13 new residents,” he says. In the next five years, Calum predicts nearly 590,000 new people will move to the South Florida coast, dictating that “the region would need over 45,000 new rentals to keep pace with the population growth.”
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While many of the 21,000 condo units either built since 2011 or underway now will enter the renter pool due to absentee landlords, there should be little impact on overall apartment fundamentals.
“A small percentage of Class-AAA buildings that are achieving rents over $3/SF will increasingly compete for renters from the shadow market,” Calum writes. But even that will be a temporary hit due to fundamentals.
With rents hitting $3+/SF in urban locations and $2.50/SF in prominent suburban areas, investors are playing a value-add game with Class-B and C buys. Those properties can be repositioned and rents pumped up, yet they'll still be a cheaper alternative.
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