Apartment Vacancies Up, Rents Stabilize in South Florida
Apartment Vacancies Up, Rents Stabilize in South Florida
The multifamily apartment vacancy rate in South Florida's tri-county area ticked upward as developers build, and finish, more apartments, a recent market report stated.
According to a Q4 2023 multifamily market overview by Lee & Associates Commercial Real Estate Services, the multifamily vacancy for Miami-Dade, Broward, and Palm Beach counties was 5.6%. In comparison, the vacancy rate for apartment buildings in Q4 2022 was 4.4%.
South Florida's vacancy rate went up because more apartments are being built in the region, wrote Luisa Pena, a principal of Lee & Associates and the author of the brokerage's multifamily report.
Pena, who oversees hotel and investment sales for Lee & Associates in South Florida, noted that 49,000 more apartment units are under construction. Between Q4 2022 and Q4 2023, South Florida's apartment inventory rose by 16,611 apartments to a total of 549,828 units, the report stated. Both factors have not only led to an increase in vacancies, but it's also caused landlords to offer more economical lease deals for renters.
"This surge in supply has led to a 1.2% rise in vacancy rates over the past 12 months, prompting developers to offer rent concessions," Pena wrote.
Miami-Dade and Broward counties are among the top 10 most competitive rental markets in the U.S., a recent study from RentCafe stated. In Miami-Dade, there are 25 prospective renters for every available unit. In Broward, there are 14 renters for every available unit. Competing for those units are both locals trying to stay in the region and high-income households from the northeast U.S. and the Midwest trying to move in. The lack of apartments, and high demand, has helped keep rents high.
But recent figures suggest that rents aren't rising as much as they used to.
The Lee & Associates report stated that the average listed rent for an apartment in South Florida was $2,128 a month, an increase of $19 – or 0.9% – year-over-year. Between the third and fourth quarters, the average listed monthly rent for an apartment went up just $4, the report added. The Lee & Associates report only analyzes rental rates sought by multifamily apartment landlords.
However, the Waller, Weeks, and Johnson index calculates the actual rents from all forms of housing, including single-family homes and condos, from data provided by Zillow. According to the index, the average monthly rent in South Florida as of December was $2,707.49, an increase of 2.2% year-over-year and a 0.11% decrease from November.
South Florida's stagnated rents is part of a larger national trend, said Ken H. Johnson, a real estate professor with Florida Atlantic University who helped create the index. As home prices stabilize, so will rent. Already 18 of the nation's 100 largest metropolitan areas (excluding South Florida) are now renting below their long-term trends, "i.e., they are renting at a discount."
South Florida's economy will benefit as rent hikes slows down, Johnson said. As things stand now, the region's high rents are a hardship for South Florida's workforce. To afford South Florida's monthly rent – the ninth highest metro area in the nation as of December – a household must make $108,299.70 a year, according to the Waller, Weeks and Johnson Index. The creation of more inventory should help create more rental relief, he added.
"We are headed in the right direction. We are just not there yet," Johnson said.
Apartments in South Florida are still very valuable in South Florida, said Todd Cohen, principal of investment sales in Miami for Lee & Associates. Thanks to its great weather, lack of a state income tax, and the creation of "more jobs than ever," the fundamentals are still very strong in South Florida, he said.
"We had amazing growth in a very short period of time on top of a giant bull market for over a decade," Cohen told the Business Journal. "After any run up, a little bit of sideways trading is sort of healthy so we can digest."
