MIAMI—Strong fundamentals drove an eighth consecutive year of multifamily expansion in South Florida. That's the big takeaway from Cushman & Wakefield's 1Q South Florida Multifamily Market Update.

“2016 was a funny year in the South Florida multifamily market,” CushWake's South Florida Institutional Multifamily Team executive vice president Calum Weaver tells GlobeSt.com, noting that the transaction pipeline trailed off a bit in the fourth quarter. “There was record sale activity, yet we witnessed economic uncertainty in the beginning of the year and political uncertainty in the second half of the year, which actually restrained transaction volume.”

(Where does class C fit into the current market? Find out.)

Authored by Weaver, the report details the state of the multifamily market in the three counties comprising South Florida: Miami-Dade, Broward and Palm Beach. Some of the key findings include:

• South Florida saw 278 multifamily property sales valued at more than $3.6 billion in 2016. This eclipses the annual record of $3.3 billion in sales established in 2015.
• South Florida multifamily rental demand continues to increase due to population growth, an inventory shortage and the rising costs of single-family homes.
• The supply of multifamily housing in South Florida continues to lag demand, with most new development coming in the class A-plus market. The supply of affordable and class B and C product remains constrained.
• South Florida multifamily rents achieved record pricing for the sixth year in a row with the strongest growth coming in the supply-constrained class B and C markets.
• Income levels in South Florida grew significantly in 2016, relieving some of the pressure created by elevated rents.
• Investors continue to eye class B and C assets as value-add opportunities that can be repositioned to target renters priced out of class A product.
• South Florida occupancy rates remain at record levels with net absorption levels outpacing new supply.
• The Fed's December interest rate hike has had no material impact on multifamily cap rates to date and likely will not in the near future. Reduced loan credit spreads will likely serve to temper any future rate increases.
• With cap rates at or near historic lows, investors are increasingly focused on cash returns, favoring markets with stronger rental-growth outlooks and properties offering immediate cash flow.
• Debt markets continue to be robust, with the multifamily asset class enjoying the most plentiful and cheap options.

“The economic and political ambiguities gave rise to a gap between buyer and seller valuations,” says Weaver. “In the second half of 2016, we entered a period of price discovery with relatively restrained transaction volumes since fewer deals came on the market for sale. However, the resultant pent up demand has given way to an extremely robust start to 2017.”