By Calum Weaver, Executive Managing Director
2018 was another banner year for the South Florida multifamily market. There were 265 multifamily sales totaling $3.9 billion – the third highest ever recorded in South Florida.
Broward and Palm Beach Counties each had approximately $1.5 billion in sales and Miami witnessed $930 million. Price per unit sales marginally decreased in 2018, but were still at the second highest levels recorded. We anticipate sales volume to remain at similar levels or possibly decrease slightly in 2019.
The biggest challenge now is finding viable acquisition opportunities with more buyers than sellers in the market. $3 billion, or 77 percent, of sales activity in 2018 was in product built in 1980 or after. The market sales activity has shifted to newer product as many of the newly constructed multifamily buildings are stabilizing and selling to investors. Older properties (pre-1980) are experiencing lower sale activity, but that is not an indication of a slowing market. There is still a huge investor appetite for older assets, but there are limited acquisition opportunities for them.
With the delta in price between new construction and value-add properties diminishing, coupled with limited value-add options, some investors have switched to seeking newer suburban multifamily properties, which trade at a higher price per unit but offer more amenities and features. Post-1980 properties, and more specifically, newly constructed apartments are experiencing record sale activity and will likely continue in the coming years as the construction pipeline for this asset class remains robust. There are currently 66 market-rate properties under construction in South Florida with approximately 21,000 new units. We expect many of these properties to sell once stabilized.
As we close out the first quarter of 2019, the South Florida multifamily market continues to ride on nine years of record rents, almost record low vacancies, historically high rental demand, and supply in check. Are we setting ourselves up for another crash? The simple answer is no. The South Florida multifamily fundamentals are and will continue to remain strong. Population/household growth, lower home-ownership rates, higher home prices, demographic preferences to rent versus buy, low unemployment rate, and improving wage growth all contribute toward an extremely healthy market that we expect to continue throughout 2019.
For more information, contact:
Calum Weaver, Executive Managing Editor
South Florida Multifamily Group