Cushman & Wakefield Report: Record Low Vacancies Highlight Bullish South Florida Multifamily Market​

Calum Weaver

MIAMI, FL,  Sept. 4, 2018— Cushman &Wakefielddone deals has released its 2018 South Florida Multifamily Midyear Market Update.

The semi-annual report, authored by Executive Managing Director Calum Weaver of Cushman & Wakefield’s South FloridaMultifamily Team, details the state of the multifamily market in the three counties comprising South Florida — Miami-Dade, Broward and Palm Beach.

The report finds record low vacancy rates in a South Florida multifamily market supported by a continuing trend of positive historic market fundamentals.

Significant highlights of the report include:

Through the first two quarters of 2018, there were 133 multifamily sales in South Florida valued at nearly $2 billion. While year-over-year sales activity slowed for the second year in a row, these values are still the third-highest ever recorded in the first half of any year.

As a whole, sales activity in South Florida was split relatively evenly between Class A, B and C properties. Palm Beach County saw a majority of its activity in the Class A market, while the Class B and C markets were most active in Miami-Dade and Broward Counties.

The number of value-add private capital deals, which historically account for as much as 30 percent of the annual South Florida multifamily sales volume, fell significantly in 2018, yet per-unit pricing did increase.

Over the next five years, South Florida is expected to see a positive net migration of 555,000 people, necessitating the construction of 64,000 new rental units to keep pace. Through 2Q 2018, there were only 18,215 units under construction.

  

“Multifamily investments remain the most desired and transacted property type in South Florida based on the strong market fundamentals and long-term positive outlook,” said Weaver. “63% of global capital is being raised to target real estate assets in North America. South Florida, as a gateway region for global capital, is awash with money seeking acquisitions.”

“Finding deals is the biggest challenge in the market, particularly value-add opportunities,” Weaver continued. “This is a natural progression, as many of these deals traded multiple times during this real estate cycle.

"As a result, investors with capital to deploy were finding themselves facing a dearth of for-sale assets to target in this space. In contrast, institutional deal activity, which, in general, is geared towards newer product, has more runway in the next few years because the construction pipeline for this asset class remains robust.”

“Debt markets remain open for business and still provide historically low interest rates,” reported Weaver. “We expect strong sales in Class A properties, while value-add properties remain hard to find but are well received if marketed correctly.”

“The effect on cap rates relative to further interest rate increases is the biggest potential threat to the current market,” concluded Weaver. “In the past year, interest rates increased ±60 bps and are now

nearer to 5% than 4%.

"Previous interest rate hikes were offset by spread compressions, and there is a case that this can continue to an extent. There is still room to lower spreads to offset any marginal up-tick in interest rates. However, if we see another 60 bps increase in rates it will effect cap rates and pricing.”

To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.

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2018 South Florida Multifamily Midyear Market Update

Contact:

David A. Meyer
Meyer Media  
+ 1 407 489 7488
david@meyer.media