MIAMI-Job growth helped stabilize Miami-Dade County’s apartment market during the first half of 2010, and the market should see a sustainable improvement in fundamentals next year, according to Marcus & Millichap’s Third Quarter 2010 Apartment Research market update. However, the market still faces near-term challenges from the condo glut.
Vacancy will rise 30 basis points to 6%, following a 100 basis point jump
in 2009, Marcus & Millichap reports. Marketwide asking rents will advance nearly 2% in 2010 to $1,057 per month, accompanied by a nearly 3% increase in effective rents to $993 per month. By comparison, asking rents fell about 6% last year, while effective rents slipped 7%.
“Many of the newly constructed condominiums in Southeast Florida that were supposed to be owner-occupied have actually bled over into the rental pool,” Jack McCabe, principal of McCabe Research & Consulting in Deerfield Beach,FL tells GlobeSt.com. “This has caused a lot of competition for renters in the marketplace. The new condos are renting out at very competitive rates and are taking some of the renters away from the long-term apartment operators.”
At 96%, Miami-Dade County has one of the lowest apartment vacancy rates among major metropolitans, and concessions are starting to burn off as credit-damaged homeowners who lost the foreclosure battle and are returning to rentals. A larger pool of renters expected in the years ahead should stimulate a return to rent growth.
“Some people are still waiting for the bottom of the real estate market,” Rosendo Caveiro, senior director in the Miami office of Cushman & Wakefield, tells GlobeSt.com. “Meanwhile, underwriting for home loans is more strict than in the past, which makes it more difficult to qualify. And people in many areas are still uncertain if they are going to have a job, so that keeps them in a rental apartment.”
Nearly 22,000 units were removed from stock in the past decade during the condo conversion craze, and only 404 apartment units came to Miami’s in the past 12 months, Marcus & Millichap reports. More than 2,300 units are planned in Miami-Dade, but none of the projects is slated to start construction. And the short-term rental wins may go to the condo shadow market.
“If you’ve got a choice between a two-bedroom, two-bath 20-year-old apartment in Coconut Grove and a brand new two-bedroom, two-bath in the heart of the financial district in Brickell overlooking Biscayne Bay—and it’s the same rental rate—it’s a pretty easy choice,” McCabe says.
Still, Caveiro expects developers in Miami to start buying up what little available land is left to build luxury apartments in 2011. He points to an emerging trend among younger, more transient consumers who may not look at owning a home as the American dream.
“Prior generations wanted to own a home and have their kids there and enjoy their Golden Retriever, but it appears that may be changing,” Caveiro says. “Owning a home may not be as big a deal as it was for us and our parents. The younger generation may prefer to rent a luxury apartment.”
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
