The countywide jobless rate measured 8.5% in March, up from 4.3% a year earlier, according to the Florida Agency for Workforce Innovation. Marcus & Millichap predicts local unemployment will exceed 10% this year, though layoffs may be offset by the roughly 35,000 jobs expected to be created by the rebuilding of Interstate 595 starting in late summer.
Asking rents for Broward County apartments are projected to decline 3.6% this year to $1,075 per month, with effective rents retreating nearly 4% to $1,009 per month, based on Marcus & Millichap's research. Local monthly rental rates ranged from approximately $950 in West Hollywood, Pompano Beach and Deerfield Beach to nearly $1,200 in Plantation, Miramar and Pembroke Pines.
"Rents are under pressure as property owners attempt to stem occupancy losses and quickly fill newly vacated units," says Greg Matus, regional manager of Marcus & Millichap's Fort Lauderdale office. "Competition for a diminished pool of prospective renters will increase this year due to an uptick in completions and the continuing presence of lower-priced shadow stock."
While only 240 rental units were introduced countywide last year, two projects totaling 500 units are expected to open this year in Fort Lauderdale, Marcus & Millchap states. However, the most significant supply-side pressure will come from unsold condos that will likely be offered for rent.
Investment activity in the Broward County apartment sector has fallen 7% over the past year and 64% from its peak about three years ago, Matus notes. The median price per unit was $84,200, down 5% from the previous year and at least 20% from four years ago, he says.
"Velocity is down considerably, and distressed properties such as foreclosures and fractured condos are still garnering the greatest interest from investors," Matus says. "Such assets are being offered at discounts from the purchase prices recorded during the market's peak, and several current listings are also discounted."
Matus adds that cap rates remain difficult to pinpoint in a market where distressed and nonstabilized properties comprise a sizable portion of transactions. Cap rates may range from 9% to 11% once an asset is stabilized, presumably within two to three years, he says.
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