Market Update Newsletter Q1 2017



Q1 2017 | Recap

RECORD-BREAKING $3.6 BILLION MULTIFAMILY SALES IN 2016 IN SOUTH FLORIDA. For the second consecutive year, South Florida witnessed a record amount of multifamily sales totaling 278 property sales with approximately $3.6 billion in value. We are now entering the eighth year of multifamily expansion in South Florida. Fundamentals remain strong and growth will continue albeit not at the feverish levels witnessed in previous years. RENTAL DEMAND New supply is easily observed by viewing the number of cranes and construction. New rental demand is more subtle and not readily quantified by driving or walking a submarket. Despite all the new construction, the demand for rentals continues to outpace supply. In the past five years South Florida’s population increased by 333,000. During the same period, 30,093 new apartment units were built. This means one unit has been built for every 11 net new residents. Over the next five years, South Florida is expected to see a positive net migration of 7.5% or 503,260 people. Using the same ratio, the region would need over 45,000 new rentals to keep pace with the population growth for the next five years. There are currently 17,652 units under construction. Another way to consider demand is look at household formation - the number of new households created each year. Household formations in South Florida are expected to increase to over 50,000 each year in the next five years. Let’s conservatively assume 40,000 new households per year and 60% enter homeownership and 40% as renters (consistent with current homeownership rates) that represents 16,000 new renters per year in South Florida. The homeownership rate in South Florida is 62.1%, near a 30-year low. In the past five years, median single-family home prices have increased 83%, 62%, and 61% in Miami-Dade, Broward, and Palm Beach Counties respectively. Simply stated, median home values are increasing at an even greater rate than rents, making ownership even tougher and rental demand even stronger. The median home value in Miami-Dade is now over $330,000, meaning a renter who could afford a 10% down payment on a median-priced home in Miami-Dade would have a mortgage around $2,000 — $700 more than the average Miami-Dade rental. RENTAL SUPPLY In the past four years 33,400 apartment units were built in South Florida. There are currently 17,652 units under construction. Hence, we are more 65% into the development cycle and the cloud of uncertainty from increased supply has not adversely effected the market thus far. The reality is the perceived unknown effects of new supply are largely known already - which is minimal and needed based on rental demand. Due to higher construction and land costs, new supply is almost exclusively geared towards Class A+ product. Any short-term increase in vacancies and/or concessions will be limited to higher end product in specific submarkets that experience several new building completions in quick succession. Affordable or Class B and C supply remains drastically underserved.

The Cushman & Wakefield MULTIFAMILY INVESTMENT SOUTH FLORIDA TEAM The MARKET LEADER in the Sale, Marketing & Financing of multifamily properties and land development in SOUTH FLORIDA . A trusted advisor, with over $20 BILLION in apartment sales in South Florida.



CALUM WEAVER Executive Managing Director

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