WeaveReport South Florida Multifamily

$2,600

10.00%

GRAPH 3 :: SOUTH FLORIDA ASKING RENT VS VACANCY RATE

MIAMI-DADE

BROWARD

PALM BEACH

$2,400

7.50%

$2,200

$2,000

5.00%

$1,800

$1,600 Asking Rent

Vacancy

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM $1,200 $1,400 2013 2014

2.50%

0.00%

2015

2016

2017

2018

2019

2020

2021

2022

Asking Rent

Vacancy Rate

Source: Cushman & Wakefield

VACANCY RATES AND ABSORPTION (CON’T) • Absorption levels are likely to be below the 18,513 units scheduled for delivery in 2023, which will likely increase vacancies in the coming year by 1.0% to 2.0%. • Submarket with 3.0% or less vacancy levels include: Coconut Grove, Hialeah/Miami Lakes, Westchester Tamiami, and Greenacres. CAP RATES AND UNDERWRITING ASSUMPTIONS • Cap rates increased in 2022 due to higher interest rates. • Cap rates today range between 4.25%-4.5% for Class A properties. Class B and C cap rates are ranging between 4.75% to 5.5%. • Investors continue to underwrite rent growth, loss-to-lease burn off and low bad debt write-offs. • At the time of writing, the 10-Year treasury is around 3.5%. This is double from one year ago. • While cap rates have increased, they have not moved in unison with the changing debt. This was explained earlier in report. • More transactions are occurring with lower leverage – 50%-60% LTV to take advantage of more favorable interest rates/debt terms. Opportunities with attractive assumable loans will be highly desirable.

WHO’S BUYING • Private capital continues to be the most active in the market. More specifically, out-of-state private capital continues to enter the South Florida region and is spurred by the positive market fundamentals, and a business friendly environment. • The last two years saw fewer new foreign capital inflows. A strong dollar and Covid were largely responsible for this. More recently, however, there has been an uptick in foreign capital seeking multifamily opportunities. Latin America, Europe and Canada remain the largest foreign buyers of multifamily in South Florida. • Investment committees remain patient in considering acquisitions. • 41% of 2022 sales volume was in newly built Class A product. Historically, this product was primarily the market for institutional investors and REIT’s. Ultra-high net worth investors and large private capital groups have become increasingly competitive within this space. • Many fixed rate loans maturing in 2023 will be facing significantly higher coupon rates. While floating rate loans will be able to consider extension options, thereby offering some protection from maturity and refinancing risk, many will also face higher interest rate

8.0%

GRAPH 4 :: UNEMPLOYMENT RATE

7.0%

MIAMI-DADE

6.0%

BROWARD

PALM BEACH

5.0%

SOUTH FLORIDA

4.0%

3.0%

2.0%

1.0%

0.0%

1.9%

2.8%

3.0%

7.5%

7.3%

6.3%

3.3%

3.5%

3.1%

1.5%

2.5%

2.6%

Nov-2019

Nov-2020

Nov-2021

Nov-2022

Source: BLS

4