MIAMI—Tight vacancy and climbing rents. That's the multifamily story in Miami-Dade County in a nutshell. Indeed, Miami is still one of the nation's top multifamily markets and foreign investors still have a strong appetite for product here.

According to Marcus & Millichap's fourth quarter ApartmentResearch Market Report, new demand for multifamily rental housing has emerged this year. The firm points to the net absorption of 1,700 multifamily units even without a significant lift in the job market.

“Retail employment has been a bright spot locally, as it has been across the country,” M&M reports. “However, expansions in degreed positions in the professional and business services, and financial services sectors have been lackluster.”

Still, the firm predicts solid demand for multifamily rental housing will generate a 10-basis point drop in vacancy this year to 3%. That's the lowest rate in the South Florida region. Net absorption of nearly 2,100 units sliced 70 basis points from vacancy last year. Meanwhile, demand for higher-priced new multifamily rentals will underpin a gain in average rents of 4.9% this year to reach $1,191 per month. By way of comparison, average rents grew 2.3% last year.

“Investors are monitoring multifamily construction, which is projected to climb this year and persist into 2014,” M&M reports. “Thus far in the development cycle, the increase in construction has been met by higher demand for rental housing. Despite the inflow of new rentals, transaction velocity and dollar volume continue to rise, fueled by confidence in the country's long-term prospects for sustained rental housing demand and expanded access to acquisition debt.”

From M&M's perspective, rising interest rates will not stem the flow of debt into the market, but may make it less attractive if interest rates climb too quickly. The greatest increase in multifamily deals is occurring in the $1 million to $5 million price tranche and in properties selling for more than $20 million, the firm notes, indicating a strong presence of large investors.

Some re-pricing of multifamily assets in lower-yield transactions typically involving larger properties has occurred following the initial rise in long-term interest rates. Generally, cap rates at this end of the market start at about 5% and extend to the 7% and 8% range for smaller, lower quality multifamily assets, the firm reports.