FORT LAUDERDALE, FL-The metro area apartment market rose from eighth place in 2005 to second place, behind Orange County, CA on Marcus & Millichap's 2006 National Apartment Index. Condo conversion accounts for the tightening market here.

"Existing supply is being depleted by condo conversions, and no new construction of rentals is scheduled," says Gene A. Berman, managing director of Marcus & Millichap and regional manager of the local office. "Investment activity has been extremely strong with a growing number of condo conversion transactions driving up sales prices." Berman says Hollywood, "where tenant demand is growing," represents a current investor opportunity.

According to the report, the overall Fort Lauderdale vacancy rate, which stood at 3.7% at year-end 2005, will drop to 3.4% this year and range between 3% and 3.5% in the Miramar, Sunrise and Coral Springs submarkets. This year, the overall asking rents are expected to increase 3.2% to an average of $1,038, and effective rents will grow by 6.4% to an average of $1,017 a month due to declining concessions.

The trend here is reflected throughout South Florida, according to a year-end report from Cushman & Wakefield. "Condominium converters were responsible for over 84% of all units purchased in the region during 2005," the report states. "The overall occupancy rate was above 98% and rent growth on a same-store basis was almost 8% during 2005's third quarter." Aggregate multifamily sales in Miami-Dade, Broward and Palm Beach counties rose from a total of approximately $1.3 billion in 2002 to nearly $5.1 billion in 2005.