South Florida will see nearly 16,000 apartments delivered this year, leading rents to flatten in markets with added supply, according to a recently released report.
Fueled in part by population growth, the number of apartment deliveries will be nearly double the 8,871 units that were completed in South Florida last year, according to Berkadia’s annual report and 2020 forecast. That marks the highest number of annual deliveries so far this cycle.
Nationwide, developers are expected to deliver an estimated 280,000 units across the country, on par with last year and continuing the 260,000-plus annual deliveries pace set and maintained since 2016. Starts and permits, indications of future supply, are expected to drop throughout the year, according to a CBRE outlook report.
Rendering of Society Las Olas (Credit: ArX Solutions)
The largest completion in South Florida will be the 639-unit first phase of Property Markets Group’s X Las Olas, now called Society Las Olas, in Fort Lauderdale. Midtown Miami is also expected to see a number of new deliveries, including the 447-unit Gio Midtown, previously known as Midtown 6.
Last year, rents in South Florida rose only 1.4 percent, up to $1,642 a month, according to Berkadia. Occupancy rose to about 96 percent, up 60 basis points, year-over-year.
In 2020, monthly effective rent in the region is expected to grow by 2.1 percent to $1,677, Berkadia said.
Jaret Turkell, senior managing director at Berkadia, predicts that rents will continue rising with “some levering and flatness where there’s a lot of supply.” Suburban submarkets and Class B housing are not as affected by the new supply as Class A towers in the urban cores, Turkell said.
Despite the surge of new rental completions expected this year, it’s becoming tougher for developers of high-rise apartment towers to score construction loans. Low interest rates have kept borrowing costs “very tight” and cap rates are very compressed, which have pushed property values up, Turkell said.
He’s seeing some recently built properties trade at or below replacement cost.
Last month, Greystar sold The Mile, a 12-unit building near Coral Gables, for $40 million, or $333,000 to Acumen Real Estate. The development, which was completed in 2016, last sold in 2015 for $48 million.
Turkell also expects that investors from New York and California, propelled by rent reform in their home states, will continue to invest in multifamily in South Florida.