Rental Demand Grows, Pushing Rates Skyward

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Even a lackluster job market is failing to put a dent in demand for rentals in Miami’s housing market, experts say, and lagging supply continues to send rates up.

“Vacancy remains tight, and growth is accelerating,” says Marcus & Millichap’s recently published fourth-quarter Apartment Research Market Report.”Despite the economic results posted so far this year, the seeds of the apartment market’s strength were initially sown three years ago.”

CBRE Capital Markets reports similar findings in its Multi-Housing Update for the quarter.”The multi-housing market remains very strong in South Florida,” say CBRE researchers Calum Weaver and Richard Tarquino. “Rents in most submarkets are at record levels, and occupancies are more than 95%.

“At the same time, CBRE cites an increase in activity by “a variety of lenders willing to provide financing for private investors… at near-record low interest rates.”‘Lenders a re aggressively pursing private cap ital multi-housing opportunities in the $1 million to $5 million range.”

Marcus & Millichap also cites the presence of foreign capital as a factor. Miami, the firm ‘s report states,”continues to cement its stature as a safe haven for Latin American and European capital, and many foreign buyers are stepping up multifamily acquisitions, frequently in all-cash deals. Some European buyers, specifically, are targeting assets in South Beach for eventual conversion to condominiums to fulfill growing international demand.”

This unfolds, Marcus & Millichap reports, even as hiring by local employers fell short of expectations established earlier this year. Still, company researchers say, “a new cycle of condo building will expand construction employment as projects move from the drawing board top resales and on to groundbreaking.”Supply is so tight, market analysts say, that waiting lists of prospective residents are lengthening,and incentives for renters are disappearing. CBRE finds record-level occupancies exceeding 95% in most of Miami’s markets.

Marcus & Millichap estimates vacancy at about 4% at the end of the year, although new project completion s will probably prevent any further decline in vacancy levels in 2013.”Asking rates by asset class,”this report states, “have increased at different rates so far in 2012.

Year to date, Class B and C asking rates climbed 2.1%to $987 per month; a gain of 0.6% was posted in the third quarter. Additionally, Class A asking rents rose 1.1% in the third quarter and are up 2.1% year to date to $ 1,415 per month.

“The brokerage’s analysts project that rents overall remain on track to increase 3.2% this year over last.With the median price of a single-family home at $ 183,000,considered affordable by households with a median annual income of $42,900, Marcus & Millichap’s report predicts that renting will remain “the most affordable housing option for the next several quarters” for householders in lower-paying jobs. Those jobs, the researchers say, are primarily found in leisure and hospitality, trade and government.

Construction of new rentals will add 390 units to inventory by year’s end, an increase of only 0.4% of the stock currently available, Marcus & Millichap reports.Next year should show considerable improvement: “About 600 units are under way and on course for delivery in 2013. The pipeline of planned rental projects has swelled from about 4,000 units earlier this year to 6,100 apartments at the end of the third quarter. In addition,about 6,500 condominiums are planned in the county.

“Vacancy rates by area, according to Marcus & Millichap, show North Miami Beach, Bal Harbour and Golden Beach at a high of 4.5% and a low of 2.9% in the Kendall and Coral Gables areas. Effective rents range from a low of $799 a month in North Miami and Bayshore market to$ 1,307 in the North Miami Beach-Bal Harbour-Golden Beach market. Renters looking for a place in Miami, where vacancy is a scant 3%, can expect to be asked to pay an average of$902 a month ,according to the company’s research.

 

Source:  Miami Today

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