WeaveReport South Florida Multifamily

cap costs, putting some borrowers in a difficult position. Collectively, these dynamics suggest that many owners of maturing properties will need additional debt or equity capital as maturity looms. • Some investors are on the sidelines waiting for selling based out of some sort of necessity, whether that be distress, loan maturity, fund maturity or in response to redemption requests. These opportunities remain limited in scope. Some developers and GPs are also recognizing that they can still crystalize solid returns, having already achieved strong value creation over the last several years. NEW SUPPLY • There are 44,780 units under construction in South Florida. This represents 13.1% of the current apartment inventory. • Since 2018 49,717 units have been built – an average of 9,943 units per year. For the same period, net absorption in South Florida totaled 52,060 units or an average of 10,412 units per year. In short, the market remains in equilibrium despite new supply outpacing net absorption in 2022 by 6,552 units. • Development activity looks to be slowing. Despite falling input prices, construction costs haven’t abated – even if they had, the cost of development equity and debt has increased dramatically, meaning the cost to build has started to border on prohibitive in some markets. With some markets posing a significant barrier to homeownership - Miami’s is ranked as the least affordable housing market in the country – demand will have a very minimal release valve, keeping pressure on the rental pool. • Submarkets with the greatest number of units under construction include Brickell/Downtown 9,192 units; West Palm Beach 3,611 units; and Hialeah/Miami Lakes 3,657. RENTAL DEMAND • In 2022, South Florida’s population increased by 64,374 or about 1%. This was more than the 55,213 population increase for all of 2021. Palm Beach recorded the highest population growth at 1.5%. • In the last 10 years, the South Florida population grew by 555,000 – a 9.6% increase. • By 2030, the South Florida population is forecasted to grow by 7.5% to over 6.8 million. • Population growth has been spurred by employers and employees migrating from other states due to the business-friendly environment and workers who can operate remotely choosing South Florida as their new home. • There have been over 100 corporate relocations to South Florida including: Kirkland & Ellis, Citadel, Starwood, West Marine, and Thomas Bravo. This has contributed to a robust and healthy office market, job growth and multifamily rental demand. • Newhousehold formations - the number of newhouseholds created each year. Household formations in South Florida

are expected to increase to over 37,000 each year in the next five years. Assuming this projection materializes, with 50% entering homeownership and the other 50% as renters that represents over 18,500 new renters per year in South Florida. HOME PRICES CONTINUE TO INCREASE • Contrary to other markets, the single family home market in South Florida remains strong. The 12-month median home price in South Florida increased by 17.2% to $562,395. • Miami-Dade increased by 15.5% to $594,646. Broward increased by 17.3% to $517,487 and Palm Beach increased by 20.8% to $563,356. • Average home values are increasing at greater rate than rents, making ownership for many even tougher. The median home price in South Florida is $562,395 With 5% down, the mortgage would be around $3,350, which is ±$1,100 more than the average rent in the market. • The homeownership rate in South Florida decreased slightly from 60.6% to 59.4%. This is still significantly below the 2005 homeownership rate of 69.2%. JOBS. JOBS. JOBS. • As of November 2022, the unemployment rate in Miami Dade is 1.5%; Broward is 2.5%; and Palm Beach 2.6%. The overall South Florida unemployment rate is 2.1% which is the lowest level for any major metro area in the U.S. • The average median income in South Florida increased in 2022 to just under $66,000. Incomes increased by 3.2% in South Florida in the past 12 months. LOOKING AHEAD 2023 sale volume is expected to be strong in two areas, 1) large new construction properties and 2) small cap properties under $10-$15 million. The second half of 2023 will see more transactions as debt markets settle and more buyers and sellers become aligned on pricing. Fundamentals will continue to be strong. Positive sentiment is reflected from investors, according to a recent Cushman & Wakefield national sentiment survey. Investor intentions are the clearest barometer of that optimism: across all respondents, 76% said they would be net buyers of multifamily in the coming year. Inflation came quickly, peaked, and may depart at similar speeds with forecasts of mid 3% by year-end. The CPI trailing three-month annualized rate of 1.8% shows just how much improvement has registered over the last few months and points to the expected improvement in year-over-year pace to come. One could contend the battle of inflation will be won through an economic slowdown. Perhaps, but not necessarily impacting South Florida. The fundamentals referenced herein suggest the region is uniquely positioned to withstand, and continue to thrive at the expense of other areas of the U.S. A business friendly environment, climate/ lifestyle, and existing and new infrastructure projects have more individuals, companies and investors looking to be part of the South Florida experience. These trends are expected to continue.

MU LT I FAM I LY I NVE S TMENT | SOUTH F LOR I DA T E AM

5