MIAMI-CB Richard Ellis gave GlobeSt.com a sneak peak at its yet-to-be-released South Florida Multi-Housing Market Update. The overarching conclusion: conditions continue to improve.
Indeed, in 2010 the South Florida multihousing market rebounded with over $1.8 billion in sales, which was more than triple the activity in 2009. Improving market fundamentals, low interest rates, and a mound of private and foreign investors significantly spurred sales activity throughout the region, according to CBRE’s Multi-Housing Private Client Group in South Florida.
“The market has picked up,” Calum Weaver, co-chair of CBRE’s Private Client Group, tells GlobeSt.com. “South Florida multifamily sales last year are up 300% over the year before. The cap rates for class A assets have come down significantly and we are starting to see improved fundamentals on the B assets as well.”
Most multihousing properties are experiencing higher occupancies and rents which is translating into higher net operating income (NOI). Occupancies have increased in Miami-Dade, Broward and Palm Beach counties and are at 96.0%, 95.0%, and 93.8% respectively CBRE reports.
With limited new supply under construction, and positive market fundamentals, CBRE forecasts occupancies to increase at least another 200 basis points over the next five years. The same trend is true for rents. In all three counties, market rents have increased, and by next year are forecast to be above the record high rents that were recorded in 2006 and 2007.
In the second half of 2011 and 2012, CBRE anticipates more value-add opportunities to begin to resurface. Over the past three years, the term “value-add” has not had the pricing connotation as it once did. CBRE says lenders have been unwilling to provide financing on major renovations, which took away the value of a given property’s potential.
Consequently, investors have had no choice but to follow the lender’s position and became focused on in-place NOIs. However, with improving market conditions, CBRE predicts both investors and lenders will become more aggressive in seeking value-add opportunities.
“If you are thinking of selling or your debt is coming up in the next two years, my advice would be to look at refinancing the property as well as assessing the market value for a sale. With the number of buyers out there, you can get a strong price or you can get cheap debt,” Weaver says. “For buyers, there are opportunities also. Normally, the market is more shifted in favor of either the buyer or seller. But right now there are opportunities on both sides of the table.”
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