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Marcus & Millichap

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Apartment fundamentals have been the most stable of any property sector throughout the financial crisis. The return of millions of households to the rental market after temporary homeownership, the emergence of echo-boomer renters and a significant drop in new supply pipelines will ultimately lead to several years of strong rent growth. The challenge will be getting through 2009, which will require exceptional tenant retention, aggressive marketing at the property level and an unwavering focus on operations.

Marcus & Millichap, the nation’s largest real estate investment services firm, regularly produces research reports on multiple property types and markets nationwide. The following information are excerpts from the firm’s Miami-Dade, Broward and Palm Beach Counties’ Second Quarter Apartment Research Reports.
Miami-Dade County
Despite the concerns about excess housing stock in Miami-Dade County, a decline in demand, not supply, will have the greatest effect on rental fundamentals in the near term. Certainly, additional condos are slated to come online this year, and unsold units ultimately may enter the rental market, providing competition for rental building owners.

“While fundamentals will soften in the near term, transactions are nonetheless being executed,” says Kirk Felici, regional manager of the Miami office of Marcus & Millichap. “The median price has declined 13 percent in the past two years but only 3 percent during the last 12 months, indicating that the market may have reached a bottom and values will not fall appreciably more.”

Following are some of the most significant aspects of the Miami Apartment Research Report:
  • Declines in tourism and international commerce will underpin a loss of 43,000 jobs in Miami-Dade County this year, a decrease of 4.2 percent. In 2008, 36,400 positions were cut.
  • In 2009, builders are expected to complete 380 units, representing a mere 0.3 percent addition to rental stock. Last year, 507 rentals were put into service. Further declines in multi-family permit issuance are projected this year, which eventually will help to realign housing supply and demand in the county.
  • Following an increase of 100 basis points last year, the countywide vacancy rate is projected to rise 120 basis points in 2009 to 6.2 percent due to sluggish demand for rental housing.
  • This year, asking rents are forecast to fall 2.8 percent to $1,073 per month, and effective rents will decrease 3.7 percent to $1,003 per month. In 2008, asking rents registered a 1 percent drop to $1,104 per month, and effective rents receded 2 percent to $1,041 per month.
Broward County
A downturn in employment will soften demand for rental housing in Broward County over the next several months, pushing the countywide vacancy rate into the low-8 percent range by year end. Property fundamentals weakened notably in the first quarter as mass layoff announcements accumulate, sending more residents into unemployment and, possibly, out of rental housing.
Apartment properties are beginning to trade hands as financing becomes more readily available to buyers in the marketplace,” says Gregory Matus, regional manager of the Ft. Lauderdale office of marcus & Millichap. “Distressed assets such as foreclosures and fractured condos are garnering the greatest interest and this property sector will continue to do well.”

Following are some of the most significant aspects of the Fort Lauderdale Apartment Research Report:
  • Total employment in Broward County will drop by 4.2 percent, or 32,000 jobs, this year. In 2008, 35,100 positions were eliminated. The unemployment rate will continue to rise in 2009 to 10 percent or more.
  • In 2009, developers are expected to deliver 500 units in two projects within the city of Fort Lauderdale. Last year, 240 rental units came online. In the near term, the most significant supply-side pressure will come from unsold condos.
  • The combination of slack demand and an uptick in construction will result in a 180 basis point increase in the vacancy rate to 8.3 percent in 2009. A 100 basis point rise was recorded last year.
  • Soft demand will underpin a decrease in rents this year. Asking rents are projected to decline 3.6 percent to $1,075 per month, and effective rents are forecast to retreat 3.9 percent to $1,009 per month.
Palm Beach County
Vacancy has held steady in the Palm Beach County apartment market, despite persistent job losses that have led to slower household creation and reduced demand for rental housing. Initial estimates of asking rents in the first quarter, too, show a rise, although concessions have increased.

“Investment activity continues to slow due to the economic downturn and ongoing challenges in the credit markets,” says Gregory Matus, regional manager of the Fort Lauderdale office of Marcus & Millichap. “A greater number of potential buyers are reportedly in the market, though, looking for either sales of distressed assets or solid cash-flowing properties that have come down in price recently.”

Following are some of the most significant aspects of the West Palm Beach Apartment Research Report:
  • In 2009, employers in the county are expected to cut 19,000 jobs, a decline of 3.3 percent. Continued contraction is forecast for low-paying construction and retail positions. Total employment also fell last year, as 23,400 workers were eliminated.
  • This year, builders will deliver 494 units, consisting entirely of the Las Ventanas project in Boynton Beach. The development will expand rental stock in the county by 0.1 percent, following no additions to inventory in 2008.
  • In 2009, weak demand will underpin a 120 basis point rise in vacancy to 9.1 percent, the highest rate since 2003. Last year, vacancy fell 10 basis points due to a slight stock reduction that exceeded a decrease in demand.
  • Asking rents are forecast to recede 3.8 percent this year to $1,066 per month, and effective rents are projected to fall 4.8 percent to $990 per month. In 2008, asking rents dipped 0.4 percent, accompanied by a 0.8 percent decline in effective rents.


Kirk Felici can be reached at 786-522-7000 or kfelici@marcusmillichap.com. Greg Matus can be reached at 954-245-3400 or gmatus@marcusmillichap.com. For a copy of the complete South Florida Apartment Research Reports, as well as reports on other property types and markets nationwide, visit www.MarcusMillichap.com.

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