South Florida Apartment Rents Keep Climbing, as New Construction Pushes Vacancy

New construction adds breathing room, with occupancy dipping to 95.1%

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With apartment rents still rising sharply, South Florida’s multifamily market remains tough for tenants and rewarding for landlords.

The average monthly apartment rent in Miami-Dade, Broward and Palm Beach counties in the second quarter of 2023 was $2,502, up 6.3 percent from a year ago, Berkadia International Solutions said in a report released Thursday. South Florida now has the fourth-highest average effective rent on the East Coast.

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The region’s fastest rent growth occurred in the North Central Miami area, an area bordered by Downtown and Coral Gables to the south, Miami Gardens to the north and Hialeah and Doral to the West. Rents there soared 19 percent over the past year. Even so, it was the region’s cheapest rental market, with average rents of $1,825, Berkadia reported.

The Downtown Miami/South Beach submarket had the region’s highest rents, at $3,280 a month.

The booming apartment market has spurred new construction. As a result, occupancy rates across South Florida fell to 95.1 percent, down from 97.1 percent a year ago, Berkadia said. All 22 submarkets in South Florida showed annual decreases in average occupancy.

Berkadia expects that upward move in vacancies to continue. It projects that developers will deliver 19,056 units in 2023 and 24,926 units in 2024.

Demand for South Florida apartments is being driven by a combination of a strong job market and unaffordable housing. South Florida home prices have continued to rise even as mortgage rates have risen to roughly 7 percent.

Still-rising rents explain why investors continue to pursue apartment acquisitions in South Florida. Greystar spent $150 million on two transactions in recent days, and a West Palm Beach apartment complex recently sold for $105.5 million.

A struggling retail property in Lantana is slated to be converted to 400 rental units.

In a separate report Thursday, CBRE said multifamily investment volume declined sharply. Deals totaled $27.5 billion in the second quarter, well below the $95.6 billion in sales during the second quarter of 2022.

Jeff Ostrowski can be reached at jostrowski@commercialobserver.com.