Multifamily Investing Looks Strong in South Florida

MIAMI-The numerous condominium conversion projects in dense areas of South Florida contribute to a strong apartment investment market, states Marcus & Millichap Real Estate Investment Brokerage Co.’s new Apartment Research Report for the South Florida market.”With condo conversions taking existing (rental) supply out, … (this) should bode well for current owners” of rental properties, says Avery Klann, vice president of the Florida office of Apartment Realty Advisors in Boca Raton. “The increase in condo conversions should lead to increased apartment performance,” says Klann. “As property performance improves, and all other factors are held constant, apartment values should increase.”Whether the increase in value keeps owners holding onto their properties or selling them off “depends on the goals of the individual owners,” Klann adds. Year to date, Apartment Realty Advisors has sold $550 million in apartment communities in Florida–which appears to not be a bad start to the year, considering that figure was just under $800 million for all of last year.The report also says job and population growth, and urban redevelopment also strengthen South Florida multifamily investing. “We expect that the diversified and growing employment base in the region and steady population increases will result in strong long-term benefits to multifamily investors in South Florida,” Gene A. Berman, senior vice president and regional manager of Marcus & Millichap’s Fort Lauderdale, FL, office, says in a statement. Berman adds the company expects asking rental rates to rise 2%.The report says companies are expected to add 53,000 jobs–25,000 in the Fort Lauderdale area–this year. The healthcare and bioscience industries should see strong gains in employment. In addition, high-paying jobs are expected to help absorb class A units.The report also states developers plan to bring 7,200 units online this year–a 3.5% increase compared with last year. Of those, 2,650 units are planned for West Palm Beach. Most of the construction in Palm Beach County consists of large garden-style communities in the northern metropolitan service area.In addition, South Florida vacancy is rising due to overbuilding and increased demand for condo conversions recently. By the end of this year, vacancy is expected to rise 70 basis points to 7.5%. The report also states the South Florida market should have a strong sales year. The median price in the area should be more than $68,000 per unit by the end of this year, with an annual hike of 6% to 9%. Last year, prices rose 18.4%. This year, asking rents are expected to increase 2% to $981 a month.