Executive Vice President Calum Weaver shares his thoughts on the state of the market, documenting $3.6 Billion in 2016 sales and a strong start to 2017
2016 was a funny year in the South Florida multifamily market with the transaction pipeline trailing off a bit in the fourth quarter. There was record sale activity, yet we witnessed economic uncertainty in the beginning of the year and political uncertainty in the second half of the year, which actually restrained transaction volume. The economic and political ambiguities gave rise to a gap between buyer and seller valuations. In the second half of 2016, we entered a period of price discovery with relatively restrained transaction volumes since fewer deals came on the market for sale. However, the resultant pent up demand has given way to an extremely robust start to 2017.
My recent Q1 2017 South Florida Multifamily Report highlights an eighth consecutive year of multifamily expansion in South Florida driven by strong fundamentals. Important highlights include:
- There were 278 property sales in South Florida valued at more than $3.6 billion in 2016. This eclipses the annual record of $3.3 billion in sales established in 2015.
- South Florida rental demand continues to increase due to population growth, an inventory shortage and the rising costs of single-family homes.
- The supply of multifamily housing in South Florida continues to lag demand, with most new development coming in the Class A+ market. The supply of affordable and Class B and C product remains constrained.
- South Florida multifamily rents achieved record pricing for the sixth year in a row with the strongest growth coming in the supply-constrained Class B and C markets.
- Income levels in South Florida grew significantly in 2016, relieving some of the pressure created by elevated rents.
- Investors continue to eye Class B and C assets as value-add opportunities that can be repositioned to target renters priced out of Class A product.
- South Florida occupancy rates remain at record levels with net absorption levels outpacing new supply.
- The Fed’s December interest rate hike has had no material impact on cap rates to date and likely will not in the near future. Reduced loan credit spreads will likely serve to temper any future rate increases.
- With cap rates at or near historic lows, investors are increasingly focused on cash returns, favoring markets with stronger rental-growth outlooks and properties offering immediate cash flow.
- Debt markets continue to be robust, with the multifamily asset class enjoying the most plentiful and cheap options.
Click here to download a full copy of the report.
Calum joined Cushman & Wakefield in 2016 as a Senior Managing Director for the Capital Markets division and co-leads the Multifamily Investment Properties team which exclusively focuses on the marketing and disposition of multifamily properties on behalf of private or non-institutional owners in South Florida. In the past three years he has successfully sold 90 multifamily properties totaling more than $800 million in South Florida on behalf of his clients.
Executive Managing Director, Investment Properties
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