Apartment rents in South Florida declined slightly in the third quarter, the first dip since the early days of the pandemic, as demand failed to keep pace with the new supply hitting the market.
The average monthly asking rent in the region was $2,121 in the third quarter, down $5 from the previous quarter. The slight decline marks a turning point for the market, which had seen 12 straight quarters of increases, according to data from Lee & Associates.
The slowdown in rent growth comes as developers delivered 13,388 new units year-to-date, surpassing the total number of apartments that came online in all of 2022, according to Lee & Associates. Absorption has lagged well behind the pace of deliveries, with 12-month absorption totaling 10,306 units.
The 5.4% vacancy rate at the end of September remained unchanged quarter-over-quarter but was a marked increase from the 4.6% vacancy seen a year earlier. Overall occupancy has declined since 2021, when the approximately 3% vacancy rate was the lowest rate since at least 2013.
“South Florida’s white hot multifamily sector finally shows signs of cooling off in Q3,” Lee & Associates principal Todd Cohen wrote in the third-quarter report.
The pace of rent growth in South Florida has been weak since the start of 2022. The $5 decline in asking rents in the third quarter was preceded by an increase of only $3 between the first and second quarters, which followed a $16 increase from the end of 2022 through March.
In October, Miami still ranked as the fifth-most-expensive market to find a one-bedroom apartment in, according to Zumper, and overall rents in the city were inflated by 8.1% in September from where they should be based on historical numbers in the Waller, Weeks and Johnson Rental Index.
Miami is the sixth-most-inflated rental market of the 99 cities tracked by the index, which is produced in conjunction with Florida Atlantic University, Florida Gulf Coast University and the University of Alabama. But the pace of rent growth in the city has nearly flatlined, rising 0.2% from August to September compared to 2.7% year-over-year.
Investment sales in Miami have also fallen back in line with the volume seen before the pandemic after two years that saw investors funnel cash into multifamily properties.
Sales of Miami apartment buildings with more than 30 units totaled $840M through August, according to CoStar data reported by Colliers. The pace of sales is a steep decline from the $3.6B in acquisitions in 2022 and $5.3B in transactions in 2021, but it remains largely on pace with pre-pandemic activity.
The average sale price and price per unit have also come down significantly from 2022 but remain well ahead of pre-pandemic values. The $46.7M average sale price at the end of August was $12M below 2022 but more than double the average sale price in 2019, Colliers reported.
The average per-unit sale through August fell $95K from the end of 2022 to $278K. Still, that slightly outperforms even 2021 and is $83K ahead of 2019.
Atlanta-based GID made the largest acquisition of the third quarter in Miami-Dade County, paying $91M for a 312-unit apartment building outside Coral Gables, according to Lee & Associates.
Fort Lauderdale-based Altman Management Co. in 2020 began construction on the property, Atlis Ludlam Trail at 7004 Southwest 40th St., and completed it last year. GID paid more than $91K per unit to acquire the development, which it renamed Windsor Ludlam Trail.
“There are signs of slowing across a lot of the major metrics,” Cohen told The Real Deal. “But slowing from what? This market was beyond on fire. A cool-off is necessary for the health of our market in general.”
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