If you build it they will come. Because they can't afford the rent elsewhere?
Just kidding. This is luxury baby!
Hey, I'm shocked that Chicago isn't on the list below. We're such a wonderful place to live you'd think we'd be up there with Miami. Sorry...I need to be more serious. This is professional journalism.
Luxury Apartment Glut in South Florida Offers Some Price Relief
Vacancies climb as wave of construction pushes down rents
Most of the new high-end units will likely be delivered in 2024.
By Deborah Acosta, WSJ
Sept. 11, 2023 8:00 am ET
Developers are racing to build more luxury rental apartments in South Florida, threatening to create a glut at the higher end of the market despite the stream of affluent new residents still pouring in.
Multifamily construction has been soaring across the U.S., particularly in the Sunbelt. It has been especially robust in South Florida. The Miami metropolitan area, which consists of Miami-Dade, Broward and Palm Beach counties, has more units under construction as a share of inventory than any other major market in the country, according to real-estate data firm CoStar Group.
About 90% of all the new apartment units coming to the market are considered higher end, or rent for $2,261 a month or more, CoStar said. The bulk of that product is expected to be delivered in 2024.
Since 2019, rental prices have increased more in Miami than in nearly any other major metro area, soaring 56.5%, according to Zillow. Only Tampa exceeded it, but just barely at 56.7%.
Rents are still edging higher in the Miami metro area, but rent prices for the more expensive apartments were down about 1% in the second quarter of 2023, CoStar said.
As more luxury units become available, they are taking longer to rent. Vacancies have risen to 5.6% from a low in 2021 of 3.6%, but still below the U.S. average of 6.9%. At the high end in South Florida, vacancies are around 8.5%, CoStar said.
The luxury sector’s vacancy rate will rise to 11% over the next two years, according to a forecast from Juan Arias, CoStar’s director of market analytics in South Florida.
Developers feel pressure to rent units quickly because their brand-new properties are empty and many tenants don’t want to live in ghost buildings. Many of these new buildings are offering one or two free months. Other concessions include smaller deposits, which in some cases have been slashed by more than 80%.
“A lot of that is not because you can’t rent them—it’s because you need to rent fast,” said Eli Beracha, director of the Hollo School of Real Estate at Florida International University.
The price of rent for the more expensive apartments in the Miami metro area fell in the second quarter of 2023. PHOTO: SCOTT MCINTYRE FOR THE WALL STREET JOURNAL
Developers say they are all piling into luxury because it is tough to turn a profit on anything cheaper. The prices of land, labor and construction have all soared in recent years, especially in South Florida. Construction costs increased by double digits in 2021 and 2022 nationally, according to CBRE, although this year the firm forecast a more modest increase of 6.3%.
In addition to the recent new development, Arias says many units were under construction before the pandemic. But these became bottlenecked because of supply issues, adding to the incoming glut of luxury multifamily units.
Not all the news is bad for Miami’s rental market. Home prices in the area have increased by more than 50% since 2020. Those high prices coupled with high interest rates are keeping would-be home buyers in the rental market pool.
While much of the new product coming online is expensive, South Floridians have been paying a large percentage of their income in housing for years, says Beracha.
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“If you’re looking at how much people are spending on rent, almost anywhere in Florida they spend about 10% to 15% more of their income on rent today compared with just a decade ago,” he said.
The Miami metro area has the highest share of “cost-burdened renters” of any major metropolitan area in the U.S., according to a report this year by the Joint Center for Housing Studies at Harvard University. That strain, however, has pushed some residents out, leading Miami-Dade County to experience its first population drop in decades.
The Live Local Act, a new law passed by Gov. Ron DeSantis, aims to help fill the affordable housing void by offering incentives to developers who build affordable housing or incorporate affordable units into their developments.