Fundamentals Driving Investor Demand For South Florida Apartments
Even as Miami's apartment market braces for a surge in new apartment units, CBRE's newest investment sales guru swears it's still a solid bet. It's in his first name, after all.
“I think South Florida, in general, fundamentally is a good bet,” says CBRE's Still Hunter, who specializes in apartment sales in South Florida. Still recently joined CBRE from Marcus & Millichap.
Those comments come as Miami-Dade will see 9,000 new apartment units deliver this year. The largest single project contributing to that supply will be the Panorama Tower (above), with some 820 units, according to a recent Marcus & Millichap report. More than 7,000 units delivered this year will easily eclipse the 2,500 units that came online in 2015.
The Panorama will also be the tallest apartment tower on the East Coast outside of NYC—let alone in Florida—when it opens, but not for long. There are taller projects on the boards around Miami.
Still, there's enough counterbalancing those metrics that are keeping investors—both foreign and domestic—hungry for South Florida apartments, Still says. For one, there's history: from 2003 to 2008, Still says some 85,000 units were converted into condominiums.
Developers are adding just 10k new units between now and 2019. But South Florida's population is booming, with some half a million new residents since the Great Recession moving to the sunny side of life.
“You just got an incredible influx of people,” Still says. And older apartments don't have the allure for modern renters. “When you look at what [developers are] building today, even if that [older] product were pristine, it would be obsolete. It's just not competitive inventory.”
Most recently, Still helped sell more than 1,200 units scattered in South Florida and Orlando, including Arbor Oaks in Boca Raton (above). That project, with 360 units, is a litmus test for investor demand: even though it's a project developed in 1995, Still says it still commanded a low 4% cap rate bought by JRK Property Holdings.
The play: go in, renovate and push what he sees as artificially low rents by some 20 cents or more per SF. “You've still got a huge pricing advantage relative to new properties,” he says.
There's evidence elsewhere of this. According to the Marcus & Millichap report, circa 1980s products still saw rents rise 6.7% this past year, with rents commanding an average of $1,275/month.
New Class-A apartments built since 2010? Rents are rising at a slower pace—3.2%—but still outstrip total rent averages for older properties at nearly $1,600/month. So long as investor demand for safe CRE bets remains, South Florida will be a target, Still says.
